Tuesday, November 5, 2013

Another day and range

The market is back in another well defined trading range which is exciting news for us market nerds.  Trading ranges represent accumulation/distribution phases which precede a directional move.  The longer in the range and the more volume transacted the big the move.  Think of Ironman's hand replusor beam blaster powering up before blowing up his enemies weapons stockpile.   The important part, however, is identifying the upper (resistance) and lower (support) range of the trading range and then look to see where the market interest lies in that range to determine the probability of a break up or down out.  

The SPX 60min PnF chart does a great job of highlighting the trading range of 1767-1758 (rounded) as well as the volume associated with each box size (2.8 points).  You will also notice that the market interest represented by the volume appears to be at the lower end of the range (support) indicating to me that this may be an accumulation for another run higher.  The case for a move higher continues to build by looking at the price range and closes for the past few days.  They are closing in the middle to higher end of the price range indicating demand.  However, the safest play is to always wait for the trading range to resolve itself and jump on for the ride.  (Think surfing as you ride the wave and enjoy the adrenaline rush).  With the amount of volume being transacted in this range it should result in a decent move either way.   Be careful and trade well because its time to watch the Ironman trilogy.  

Thanks for reading.  

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