Luna $ Ticks

September 8, 2008

Hold your Breadth

Filed under: Trading SPX SPY — moontrader @ 8:00 am

Although I predicted we could have a pullback from Friday’s bottom (as I showed in this chart) I couldn’t possibly imagine such a gap in the opening. However, for those with short positions, my first advice is: do not panic. Do not be overtaken by fear or frustration, otherwise you won’t be able to think and see what will be really happening this Monday morning.

Now, here’s what we should pay attention to before taking any action:

  • Volume at the opening: how large will that be?
  • Check Breadth.
  • DMA’s!!! Now this is extremely important, since the 3 DMA’s are converging more or less where SPY is at right now (as I’m writing this – 9:00am ET – SPY mark is 128.01): DMA 3×3 = 128.22, DMA 7×5 = 128.49, DMA 25×5 = 128.03.

You should be able to check these points during the first half-hour of today’s trading session.

Although many times there’s a huge rally before a huge sell-off, it’s not garanteed that this will be the case. For those uncomfortable with a short position at the moment, my advice is to close it somewhere today and wait untill you have a better sense of the potential extent of this rally. I believe the strength of the opening won’t hold up throughout the day, but let’s keep the mind open: anything can happen. Try to read the charts for a message, keep cool and… good trading.

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