Wednesday 17 February 2010
You can see from the chart how small was today’s trading range. Volume
was not all that great, either. Price is at/near resistance. [Support or
resistance should be viewed as an area and not some absolute number.
Allows for flexibility.]. Whenever there is a shortening of a range at
resistance, it can be a red flag, buyers unable to extend the range higher.
That is half the story.
The other half is lack of selling. Here is price at resistance, and sellers
are absent, not willing to assert themselves and press price lower, or
unable? The trend is down, so the edge goes to sellers, but where are
they? Good question, given the extent of the waterfall decline just a few
short weeks ago when sellers were clearly in command.
To what degree of importance was the mini-selling climax on the 5th of
February? The very large volume that day tells us there was extensive
short-covering and some net new buying that came into the market. Is
the selling effort then spent, for now?
One can never know in advance what a market will do, and fortunately,
we do not need to be in a position to guess. All we need do is gather the
facts. Price is at resistance, and there is not much volume to punch it
through, and the range was rather small, negatives. On the other hand,
there has been no selling resistance, so until sellers show up, price will
either rally or creep higher.
Selling, or more buying, can enter at any moment. We do not know which
will, nor when, nor does it matter. All we need do is monitor present tense
market activity, and the market will show us which side will prevail.
Yesterday was a small trading range, but no effort to move price lower, so it
would be premature to be short. The near term momentum is to the upside,
but somewhat suspect, as we view it. All we need do is wait for directional
price movement, accompanied by increased volume, and we know we will be
on the right side of the market. The upside appears limited, but if price
shows a weak reaction down over the next day or two, it could be the impetus
for a continued upside.
Waiting for market direction.
