Shakeout And Reversal - January 17, 2012

[Billy]

In spite of negative price changes Friday for all the main indices, the 20 DMF was 18% positive for the day and all the closing prices have successfully conquered and surpassed the intraday VWAP’s. Professionals and large players’ programs were clearly buyers of the weakness.

IWM enters the shortened opex week near a very strong support confluence area (5-day VWAP =75.99, 200 dma = 75.95, WPP = 75.91 and MR1 = 75.90) which was successfully tested all of last week. Friday’s shakeout and reversal have all the characteristics of an imminent fast up move after a false down move.

With the robot looking to short at a limit price of 77.52 near weekly R1 (77.40) and daily R3 (77.59), the setup has a good chance to trigger soon. I can only repeat that, technically, it looks like a quick pullback opportunity against the trend with a limited potential below the 200-day moving average (75.95). It doesn’t deserve much leverage exposure IMHO as long as the 20 DMF stays neutral. The initial stop at 79.16 is mostly protected by Monthly R2 (78.05) which has a 66% probability of marking the highs for January.



The GDX MF remains in a buy mode, but the robot could not find any edge for a new secondary entry today. Last week’s main resistance was quarterly pivot (54.78) and we’d like to finally see a close above that level to further improve the technical progress of the initial position.
Billy