Technical Trades
Technical Analysis applied to Stocks and Futures.

It’s that familiar and usually very reliable pattern known as the Head and Shoulders. Current levels support a very good r/r short setup, with stop over the R shoulder to target the $22.00 long-term price support. Chart paints the picture pretty well.

Long-term charts: HERE
Notes for those long-term charts:
*Monthly and daily PSAR support short side.
*Daily Bollinger bands show a negative reaction to the very bullish action in April.
*Using that daily chart, I count a 5 wave move down from the April, with the abc corrective concluding in early June, putting the fuzzy C resistance in at around 40.40. In the last month that C resitance was bullishly broken - but I do note the relatively light volume and I note in this chart that daily money flow did not support that bullish move. (Weekly money flow using the same chart is actually supportive of the bullish trend move since Oct ‘04, but I do note the volume by price at current levels, and thin nature at 30.00. Should the 37.50 area support fail, it will have a distinct “top heavy” appearance about it.)
*Note the weekly diamond top pattern potential here:

I note that price tested the fuzzy C support on Monday and we’ve had the bullish move today as a result. My usual bias from that daily action is bullish while it’s above the C and bearish if it falls below it. So the current short setup is in the face of that bias…but one must contemplate the potential power of the weekly SHS and weigh up whether any short setup is worth the risk. Given the nice downside target, and limited risk for the play, it isn’t a bad plan. In the end, it’s always about risk vs reward. Does one risk shorting on the bullish side of a daily fuzzy C? Perhaps one does when the bigger picture highlights what it has….

And if that 5% risk plan is too rich for you, consider the 2-day count today; from the bullish move off the fuzzy C…which highlights a 1% risk setup today; short the breakdown of the latest 5-minute fuzzy C, with stop over high of day. Risking 1% to make the +47% target down at $22.00. That brings the r/r to an amazing 47! Now they are good numbers.

Thanks to Rob from mrmarketishuge forum for the heads up on this one. I note SM is shortable at IB today.