As I wrote in my previous report, I placed a buy stop to add to my position in the 10990 area and was filled. I do not have any stops or target orders placed since it is just an add to my existing position trade from 13150. I am keeping risk mitigated by not using margin and keeping my size relatively small. If for whatever reason price collapses, it will not be too uncomfortable and I will probably look to add more.
From a technical stand point, this market is in a good position to build the next swing. The low put in at 9900 followed by a solid candle is a good form of confirmation. When I wrote about this in my previous report, price was around the 10400 area, and I said you can buy into the low, take more risk, but get a better price, OR you can wait for confirmation, not get the best price, but have momentum on your side. I chose the more conservative scenario since I would rather have momentum in my favor.
In terms of structure, this higher low formation is not only coming off of a minor of 10534 to 9989 (.618 of recent swing) but it is also coming out of a broader overlapping support of 10988 to 8656 area (.618 of broad structure). This combination makes this area attractive for both swing trades and position trades since the rally potential off of this area is of a broader magnitude. In other words this is a big picture support and IF price bounces, a retest of the mid 14Ks to mid 15Ks is very reasonable.
At the moment, this market is still within an attractive area to get long since the reward/risk and momentum are both favorable. The key is sizing in a way that is inline with your risk tolerance because a failure from here can take price back to the 9Ks. Any swing trades from here and you are looking at around 600 points of risk at least.
Can this market still collapse? Of course it can. The scenario to be mindful of is a break below 9900. That will put price back into the lower reversal zone boundary near 9683 and nearer the 8658 low of the larger . This area is where I would anticipate the failed low formation. This is when price goes slightly lower and reverses dramatically. Often this scenario appears to be very as it initially unfolds, and then results in a false break. I am not saying this will happen, I am just laying out the possibilities in order to plan ahead just in case. This is how you avoid reacting, which is typical of the herd.
In summary, this market is starting to trade slower compared to the way it was behaving back in December. It is not moving 2K points per day. At that time I was writing that the will bring balance to these markets, not a push to 30K. Balance means slower, range bound type markets which is more in line with reality. Realistic markets offer unlimited opportunities as well, but to capitalize on them structured decision making is a major requirement. As far as my position trade long, I plan to lock in some profit in the low to mid 14Ks and then see what happens from there. A run back up to the 16350 area is very reasonable as well. Either way, I have a plan and I adjust as the market provides new information.
Questions and comments welcome.