Tuesday, October 11, 2011

@AllAmerInvest Roubini, Afraid to Trade, Occupy Wall Street, Bonus Bucks

A Valuable Lesson to Learn from 2010 Support Range Break 

Let’s start with the May “Flash Crash.” Price plunged roughly 200 points from 1,220 to 1,040 to settle into a sideways “Trading Range” between 1,040 and 1,130 (roughly 100 points).

The “Midpoint Fair Value” price developed at 1,090.

Over the next few months, price traded within the context of this range, though it slipped out temporarily in a “Bear Trap” as July 2010 began.

Traders who logically short-sold under 1,040 were forced to buy-back to cover their losing position, which resulted in a “Popped Stops” burst BACK into the Range (stopping at the 1,090 value area).

That’s almost identical to what happened on October 4th (2011)’s “Bear Trap” recently.

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Original content Bob DeMarco, All American Investor