Shaking The Coconut Tree – November 1, 2011

[Billy]

Forum Clusters 111101.xlsx

The consolidation and shakeup scenario described yesterday is panning out perfectly so far. But the 20 DMF comment by Pascal warns of potential serious hazards within 2 days. Therefore my discretionary setup and trading plan below, written before reading Pascal’s comments, will include a time-stop exit at the close tomorrow if the position is not up by 3.80% from entry ( 1 ATR) by then.

Although the robot will stay in cash, I am a discretionary buyer of weakness today around the first support cluster (72.33-71.25) and will not pay more than the 3:1 reward-risk limit entry of 73.33. Ideally, an entry at daily S3 (71.97) is perfect with a 95% statistical probability of containing the low for the day. My discretionary stop will be a decisive break below the quarterly pivot (71.25). Such weakness would really warn of a bull trap and trend reversal. If the uptrend resumes, I expect the 200-day moving average (77.82) to be tested soon and it is my first target.

Notice that the second cluster resistance is now weaker than last month without any November monthly floor level. A bounce back from the strong first support cluster will have more chances to successfully reach the second resistance cluster and the 200 dma.



GDX is on a very strong support cluster with strength of 28 and the path of least floor resistance is north. But remember that the GDX robot is neutral and the current volatility does not help the already weak reliability of floor levels for this emotional instrument.
Billy