Wednesday, August 01, 2007

Is This Morning's Drop a False Breakout or Fresh Bear Leg?

If you click on the chart, you'll see what I'm looking at this AM to set up the big picture for today's trade.

Will we return to the trading range defined by the upper end of the range (top blue line) and Monday support? If so, that false breakout should lead to nice short covering and a retracement of much of that range.

Will we see fresh selling and a new bear leg? If so, we should see volume hitting bids and taking us below the overnight lows without us sustaining a move into the prior trading range.

My job, as a trader, is not so much to crystal ball what will happen as to define the possible scenarios and then *identify* what's happening early in the unfolding move so that I can take advantage.

Monday's support is today's resistance; let's see how we trade as we approach that level.