PCLN Update - Market Example

I'm going to update the general market conditions as well as short term and PCLN is a pretty good proxy for that, although it's not the best model.

PCLN has done EVERYTHING we expected it to do and hoped it would do since I first said, 

"I'd be interested in adding to a PCLN core short or perhaps a Put trading position above $1100"

I didn't picked >$1100 out of the blue as we were trading below $1100 at the time, there was an obvious resistance zone there which makes not only the zone, but the psychological centennial mark of $1100 a magnet for a head fake move. 

If you understand what a head fake move is used for, then you'll understand why $1100 is such an important level, if you don't understand why $1100 is an important level for a head fake move, I'd urge you and anyone who hasn't read the two articles that are always linked at the top right of the members' site, "Understanding the Head-Fake Move" part 1 and 2.

 Lets take a quick look and understand that I am bearish on PCLN here.

1) This is the resistance range easily visible at an already known psychological level where limit orders to buy and traders who see the move will step in, as I often say, "Wall St. doesn't do anything without a reason" there's no random walk here.
2) After the breakout of $1100 I'm interested in PCLN short, but I want to get as close as I can to the lowest risk and shorting the first break of $1100 when there's no reversal process at all in place is crazy, expecting an instant , next day drop is not realistic, there's almost always a process so what I hoped to see and based on charts thought we'd see was a Doji or a star after that candle in the same area that would create a rounding or reversal process. 
3) The next day we got exactly that, but these are almost always proportional to the trend that preceded them so if you look on a 15 or 60 min chart you can see 1 day is not enough, so that day I said "I'd like to see another Star/Doji" in the same area to widen the "U" top reversal and the next day we got that star candlestick.
4) At this point, looking on a 60 min or any intraday chart long enough to show the 3 days, there was a clear line of resistance again and as I often remind, the market is fractal, the same concepts that apply to daily charts apply to intraday charts or weekly charts. That clear resistance line (go back and look at the series of PCLN posts in the archives on the members' page) was a clear magnet for a head fake move. We have a larger one (Above $1145) already in place, the smaller one above that range would almost act as a primer to a larger move just like you need a spark to ignite a much larger ammunition piece. We got that yesterday at "4"
5)Yesterday I saw this as we had been looking for and said the "ideal" scenario would be a gap up open in PCLN and I don't know how we will get it after the negative minutes unless there's manipulation like an overnight Yen slam down, wouldn't you know it, there was an overnight Yen slam down and we got the exact gap up open I had hoped to see yesterday and said I would likely enter a short or put position right off the open if such a thing occurred as WE NEED A GAP HIGHER TO CREATE A DAILY CANDLE CALLED A BEARISH ENGULFING CANDLE WHICH IS THE CONFIRMATION OF PCLN'S DOWNSIDE REVERSAL.


THIS IS WHAT TODAY'S GAP UP OPEN WOULD LOOK LIKE WITH A CLOSE LOWER TODAY CREATING A BEARISH ENGULFING PATTERN, JUST LIKE WHAT WE PREDICTED FRIDAY FOR THE MARKET THIS MONDAY AND GOT IN 3 OF 4 MAJOR AVERAGES.

 I drew in the rest of the day, but the open-the very top of the last daily candle is the real open from today, the close is what I drew in and that's a bearish engulfing candle or a reversal confirmation candle to the downside.

So you see, not every move up is bullish, this actually is very helpful because even if it doesn't close the way I want, if I feel the position may be in trouble, I'm so close to any stop I want the risk is mitigated and the entry is as good as it gets, 

LIKE I POSTED YESTERDAY, "SOMETIMES YOU JUST HAVE TO HOLD YOUR NOSE AND JUMP IN" even though they seem like the most difficult emotional trades, they are often the best entries with the least risk.

I said I wanted to check the open if we got a gap up and PCLN shows 3C did not confirm the gap up, again, exactly what I wanted to see.

So, while yesterday we (PCLN short traders) were hoping for this gap up, it doesn't change the bearish sentiment or where we think it's going, it's just a short term move that is helpful in risk management and getting the best entry possible (with puts, the lowest premium).