Oh no! Evening star at resistance point! Run! Run! The sky is falling!
Ok, I may have exaggerated a bit on the “run, run” side of it; but seriously, you have to be cautious and on guard when you see this pattern at a key Fib resistance point.
Yesterday, I postulated that we could either have a breakout day or Fib resistance day. Although I was leaning on the breakout day, hence my moving more cash to stock, the market showed its hand by not only confirming a resistance day but also giving us an evening star reversal pattern to boost.
Take a look at the SPY daily chart below:
Did you see how today price closed below the 61.8% retracement? Now, just because we have an evening star candlestick pattern doesn’t mean we are going down for sure tomorrow; but it does mean the probability of a down day is high.
The only good thing I see in the chart that “may” stop the down slide tomorrow is the support of the blue 79 simple moving average line. If that support line holds, we may have a failed reversal. On the other hand, the market could easily slice through the line like hot knife to warm butter.
In summary, tomorrow is cautious day.
Today, I got busy again. Yesterday I got busy buying up stocks for possible breakout; today I got busy unloading stocks because I couldn’t find the breakout. I dumped NOK (why did I choose NOK over RIMM when RIMM had been so good to me in Nov?), EXK, WPRT and reduced position size on GLOG & SZYM. I sold DDD & SSYS for profit in the morning but ended up buying back DDD by end of trading day.
I also bought my way back in RIMM during the day so I could have an open position for possible more run on it. I traded RIMM during the day and was able squeeze into a position with a net profit to cushion tomorrow price action. You can see my daily trading activities here @followtheprice.
For those who are keeping track, AMRN & LRAD continues to drag my portfolio down. Since these are position play, I usually ignore them during the day so they don’t interfere with my daily trading activities.
Now, I am holding only AMRN, LRAD, RIMM, USU, SZYM, DDD, EMAN, GLOG & 33% cash.
Depending on tomorrow price action, I may continue to raise cash as I see fit.