I wrote about this level in my previous report, but I did not think it would be compromised so quickly. Like I always say, anything can happen. The question is what to do now? In my previous report I wrote about being flat until the market could show clearer signs of stability. Well this type of move opens some new possibilities.
My plan now is to wait for a retrace and then buy back in on the first reversal back up. I am not going to buy into these highs as as the market looks at the moment. The first level I am now watching for is 297 which is the minor .382 of the current swing, and if price happens to push below that, then I will be watching the 287 to 281 zone which is the .618 area of this recent move.
Keep in mind price may present an even more shallow retrace, so I will be prepared to buy back in with a 30% position if I see signs that make sense. The fact that the 304 level has been taken out implies further strength ahead and this move can be the initial leg of a retest back into the 330s (the one I was trying to get long for to begin with).
Also watch out for the fakes, there have been numerous, An example would be if price retraces to 297, shows a reversal, runs up to 305, and then retraces back to 287. It can happen. So if I manage to get long, and price starts behaving like this, I will get out quickly, because I can always get back in. This is not an easy process, but that is how some environments are. You have to roll wit the punches.
Also for those who have been shorting, as I wrote in my previous report, the break of this level is a clear sign of momentum change. Just a heads up. Shorting (which I avoid in these markets) is now higher risk as resistance levels are more likely to break and supports hold.
If for any reason price decides to retrace further than the 280s, then the 270 level is one that I will be watching for a larger time frame reversal. I do not expect price to retrace that low, but that is my plan IF it chooses to. Also 270 is going to be a reference point for risk as well. It is actually an extension level measured from the 286 range low and proved to be the bottom of this impressive rally.
In summary, this surprise up swing is a signal of momentum change back to . The fact that the 304 resistance has been taken out makes it reasonable to expect higher prices in the near term. Things change fast in these markets, and being able to adapt quickly is an important part of short term trading. Upon a retrace of 297, or the 287 to 281 zone I will be looking for reversals to go long. I will evaluate the risk at that time, but I can tell you now, I will probably be using the 270 area as my initial stop. Also if I manage to get back in and price is not cooperating, I will look to get out quickly as well. In a momentum environment, price should not be falling apart, even if it fakes out, it should be shallow. Remember we are not missing the train ride, because it is not going to the 330 area in a straight line.
Comments and questions welcome.