By: Jeff Cooper
Hit and Run Trading Morning Report - December 7, 2023
Editor's Note: there is a mini-Bonus Report at the bottom of this page.
Bulls Snatch Defeat From Jaws Of Victory
The Truth Teller, IWM, made a new high for the move on Wednesday and then fell through the session leaving a large range outside down day or Lighting Rod (LROD).
Range precedes price and these large range outside days attract traders’ attention often triggering
Momentum in the direction of the reversal.
Not all reversals are created equal.
On Tuesday on the Hit and Run Private Twitter Feed we flagged 188 as resistance as it squared-out the 161.67 October 27th low.
188 is 180 degrees up from 161.67.
Happenstance? Notice how the October 161.67 low
The power of Wednesday’s reversal from a picture-perfect square-out suggests IWM can drop 90
Degrees down from yesterday’s high which is 174.
Obviously 174 is also 90 degrees up from low by definition.
174 ties to the 50 day line which has just barely turned up.
174 marks the open of the large gap up on November 14th.
However, the end of this week, December 8th has a Time/Price square-out at 177.80.
In other words, Dec 8th is 90 degrees square 177.80.
177.80 ties to the rising 20 day moving average for a possible Holy Grail buy signal.
The first time IWM pulled back to test its 20 day moving average on November 9th following consecutive up gaps off the late October low defined a significant low: a few days later we got the massive Breakaway Gap.
In sum, in the bullish scheme of things, a pullback to the sharply rising 20 day moving average should find support.
As offered above this could occur quickly as by this week’s Friday OpEx.
A fast shake-out to the 20 day could drain the FOMO and complacency produced by the rally.
The problem is that there is a Bull Trap setup: failure below 179 the bottom of the tight range preceding Friday’s breakout could see a fast drop as fast moves come from false moves.
A weekly IWM shows a 50/20 Bowtie in the 180/181 region…just above the 177.80 potential Time/Price square-out.
Drilling down to an hourly IWM shows a trend channel with the bottom rail at this 178 region as well.
Because there is a possible Time/Price square-out for Friday at this 178 region, we have a setup for a quick 2 day plunge.
A tell for Wednesday’s reversal was NVDA.
Hit and Run bought NVDA on Tuesday morning based on a Combo buy setup:
1) Dec 5 squares 455 for a Time/Price square-out
2) NVDA was testing its 50 day line for the first time off its high
3) It turned its 3 Day Chart down on Monday for the first time since high.
Hit and Run members sold NVDA into Wednesday morning’s strong follow thru.
It was in my daily Minus One/Plus Two sell position.
In other words, the 3 Day Chart was pointing down for the Minus One part of the equation and had traced out 2 consecutive higher daily highs for the Plus Two part of the method.
Similarly, MSFT showed a Minus One/Plus Two sell setup on Wednesday morning.
Taken together both these big cap setups did a good job telegraphing Wednesday’s reversal.
TLT’s Time Price square-out on October 23rd nailed the low.
To recap, Oct 23 aligns with/vibrates off 83.
The low on that day and the low for the move was 82.42.
On Friday Dec 8th we get an important Jobs Report.
What’s interesting is that Dec 8 is 180 degrees straight across and opposite 97.
On Wednesday TLT closed at a new high for the move, 95.87.