Trading Rules Collection: Nice Bounce

Posted on June 11, 2012 by Jan Arps' Traders' Toolbox

On Thursday of last week I had one reader ask me if the nearly vertical move on the ES contract on Wednesday was ‘for real’ or not. Let’s take a look at that. In last week’s blog I pointed out that 1250 would be a major support level for the ES contract. Sure enough the market tested that on Monday and it held. In the process of testing that level and bouncing off of it, the daily chart formed nice bullish pivot divergences in the Radar1 Fear/Greed indicator, the Radar2 Price Leader, as well as the Radar3 Trend Strength Index. This adds a bit of bullish fuel to the current technical pattern. So now that we’ve bounced off of that support level, how far up will the market go? Although no man can answer that question with certainty, if the price can hold above the current down-trendline, and close above the long-term Triple Trender, then I will be more willing to trade on the long side of the market for the time being. If that is the case, I foresee the next upside resistance to occur around the 1360 level.

Of course, one hiccup from Europe, one sneeze from Uncle Ben, or one bad ‘check-up’ from one of our ‘too-big –to-fail’ financial institutions and we could be looking at the 1200 levels up close again in no time at all. I’ll try and be ready with trades in either direction. Some selections from my weekly watch-list are shown below.

As always, if you have any questions about any of the indicators on these charts you can find some explanation of them at this link. I will also be presenting a free webinar demonstrating the use of these tools on Thursday June 14 at 1:15 PM EDT. The registration link will be provided later this week to all the subscribers to this blog. I hope to see you there!

_____Longs_____

(This one shows a breakout of the trendline to new highs accompanied by a Pullback 23 signal. )

IRM

(Another breakout of the down-trendline as Radar 1 Fear/Greed is breaking its previous highs. Radar3 Trend Strength is now bullish and the Triple Trender has just turned bullish as well. All of this followed a bullish pivot divergence identified by the Arps Automatic Divergence Finder. )

ALK

( Another stock which has broken above the down-trendline. The Triple Trender is now bullish as well as the Radar3 Trend Strength Index. Radar 1 Fear/Greed is also making higher highs. )

_____Shorts_____

ATPG

(A bearish Pullback 23 signal as the Triple Trender synchronizes bearishly.)

OMI

( Here we see a Trender Pullback into the long-term Trender accompanied by a bearish Pullback 23. This is happening around the previous low which is now resistance.)