In last night’s post, I noted that the market had entered a trading range. How a market negotiates the top (in this case) of a trading range will tell a trader skilled in reading the chart how to trade it. Today was a textbook example.
A Lesson on the UpThrust Trade
Last night, I posted a 45,000 Tick Chart to highlight the trading range. I’ve updated that chart with today’s price and Weis Wave action. I’ve also added a 9,000 Tick Chart.
For the past week, the 1352.75 level painted on February 9th has been the high level containing upside progress. That level was approached on the 13th and again on the 14th, but repelled both times. This market action along with the low of 1333.75 made February 9 set the boundaries of the trading range.
Yesterday’s Spring sets up the UpThrust
The spring from yesterday afternoon set the stage for higher prices overnight, which occurred. Note, however, the volume on the up wave that drove the market up above the 1352.75 high. I’ve labeled this “A” on the 45 K Tick Chart. It is lighter than any up wave in the trading range. A market will be unable to rally higher on such light volume.
The market upthrusts and comes back down well below the trading range upper trend line. If you were up early enough, you might have gotten a short off near the Globex session highs. One of the nice things about UTs is that we will sometimes get a second chance.
Short Entry on the Test
That second chance came just after 12:00 noon (EST). The market revisited the 1352.75 level at this time, and again the wave volume tells the story. You can see the light up volume on wave B on the 45 K Tick Chart, and which is also identified on the 9 K Tick Chart. Like the UT, a market will be unable to sustain a rally and push through resistance on such light volume. This was a classic test of the UT and the spot for a short.
Weis Wave Clarifies UpThrusts
UpThrusts are a favored high odds trade. The probabilities become clearer with the Weis Wave. You can learn more about UpThrusts and the Weis Wave at the links below:
What to Expect Next: Lower Prices
As I mentioned the other night, the choppy action we had been seeing over the past week is indicative of a reaction about to take place. I will now be looking to see how price deals with the bottom of the trading range (1333.75). Current conditions indicate it will drive through and head lower. We shall see.
Free Webinar Tomorrow
Tomorrow, I will be in an interview at TradersTalk with two other traders. You are invited to join (it’s free). Here is the link to learn more and register: TradersTalk Webinar. I look forward to seeing you there.
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