Boomerang Trader

Market rebounds but watch for reversal Friday 7/9/10

Posted on 11. Jul, 2010 by Johnnyr in Daily Recap

Good morning,

The market has reversed dramatically off the lows of the 1003-13.00 zone forcasted by Mohan in his Daily Directional Forecast briefings. He had forecasted a rebound to 1060 area which seemed out of the question at the time prices were hovering lower under 1015.  It was just a market that had gotten stretched too far to the downside.

One good method of knowing when to avoid a specific trading day is to first look at the range after the first hour or so. If the range is under 8 points or so that market is contracted. There may be a range break out later and that will depend usually on how bullish or bearish the tape bias is (see our Boomerang  trading manual for more details or go to www.mohansmarketforce.com and read up on the “High 5″ section)

Another approach I use is to click on the time area of the Boomerang chart on the botttom, grab and squeeze the chart together.  If the price bars are all mixed colors and the Trailblazer/Bias line channel is not smooth then stay out of that market or trade very cautiously.  Also, whenever you see a strong 2 day up (or down) period like we saw Wednesday and Thursday, that 3rd day could either be a contracted continuation (like it was) or a strong reversal.  The first chart I show is Friday’s with the example of what I just explained here.

So as mentioned, Friday was a very choppy day and trading was more difficult with the light volume and tight range.

Let’s take a look at the Wednesday and Thursday highlights with my commentary on the charts.

First, here’s Friday’s with the chart scrunched together early in the session to show the caution signs after a 2 day up run.

Tags: day trading, e-mini, emini, indicator, S&P 500, scalping