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Tuesday, July 24, 2012

Don't Chase It

Looks like we jumped the gun Friday, getting back in too early after scoring 15 points on the downside.  We have a substantial cushion, being up 626 points/45% since inception on March 22, but I really hate giving any of it back on a off-hours dump like this.

As I posted Friday:
If you didn’t get short ahead of time, the likely downside of this push is the small channel bound at around 1364.  I don’t think it would be worth jumping in at this point.  Of course, if we break 1360, it’s a different story.
Having a stop at 1360 doesn't help much when the market gaps open down 20 points.  So, we'll focus on where we're likely to end up today.

While the upper bound of our rising wedge has been pretty clear, the bottom has so far refused to present a crystal clear picture.  Whether or not to include which tails has left the exact slope muddled, which means it's difficult to anticipate the probable low this morning.
But, there is a trend line (yellow, dashed) in the daily RSI that indicates a bottom is already in.

It caught the tumbles on Apr 10 (-28.25), June 11 (-42.25), June 25 (-24), July 12 (-19.75) and is thus skilled at putting a stop to big drops.  It has just been tagged this morning.

On top of that, check out the red channel lines we drew months ago.  If I'm not mistaken, that's a solid tag on the latest of the channel lines that also suggests the bottom is in.

Continued on

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