Trading Plan for July 18, 2011
Current Long Positions (stop-losses in parentheses): SPY August 136 Calls, SCLN (6.09), ABAT (0.94), MDF (4.66), SIFY (5.60)
Current Short Positions (stop-losses in parentheses):
BIAS: 20% Long
Economic Reports Due Out (Times are EST): Treasury International Capital (9am), Housing Market Index (10am)
My Observations and What to Expect:
Futures are about 1% lower.
Asia was mixed and flat in trading, but Europe is down over 1% across the board.
Stocks on Friday, managed to rally nicely off of the day's lows, and close near the highs of the day to form a bullish piercing pattern on the previous two candles on the daily S&P chart.
The 20-day moving average has acted yet again as a support level for the S&P for the second straight day, and with the early morning weakness we are currently experiencing, we are poised to test the 20-day MA again at the open.
A break of last week's lows and the 20-day moving average could lead the market to test the 200-day moving average in the short-term.
Last week's lows represent the 50% Fibonacci Retracement on the S&P at 1307 as well.
Volume was much higher on Friday, mainly due to it being Options Expiration.
On the weekly chart, the candles formed over the last 3 weeks represented an evening star pattern, which is indeed bearish.
Market is heavily oversold in the Short-term, which could hamper the ability of the market to see further downside going forward.
Earnings season will see a wide range of major companies reporting this week, including Apple (AAPL)
Potential Head and Shoulders pattern forming on the S&P.
My Conclusion: Today's weakness heading into the market will make it difficult for the bulls to do much of anything. Watch to see if we stay below the 20-day moving average in the first hour of trading, if not, there's a good chance that we've established the day's lows.
Here Are The Actions I Will Be Taking: