Hey Market Pilots,
This week began quite nicely with the market opening with a gap up on Monday the 13th. However, that elation and satisfaction was short-lived and brutally squashed by a massive liquidation break in the middle of the day. Few were spared but tech got hit the hardest. Let me show you a few insights which kept me from panicking or going short.
First, on the day of the liquidation break, the internals were not supporting the move. With such a huge move in the market, you would expect the $VOLD to be significantly red, somewhere in the -7:1 or -15:1 range. But instead, it was pretty much neutral all day. I found this to be very strange as I was watching it, but also couldn’t argue with the price action at the time.
The other piece I was working with was my trusted Moxie Indicator and the rules I have established for it. On 7-8-20 I got a Moxie Price Trigger (green arrows) which told me momentum was now positive and increasing and price had tested the Hourly 50 SMA for support. Therefore I was in long / buy mode. Once the dust had settled from the Monday drive down, I saw that the Hourly Moxie Indicator was still positive over zero despite the ferocious move. That was a sign of internal strength and since Moxie was still over zero with price below the 50 SMA, A Moxie Trampoline Setup (my strongest trade) was in the works.
The final piece came the next day. As price began to recover, I could see the beginnings of my next favorite pattern: The Elf Shoe.
The rest of the day went by and the Elf Shoe pattern held up perfectly and put price over the necessary moving averages to get mostly out of harm’s way. I wanted to see follow through and support the next day which we also got. So unless aliens come and attack, I see the market on its way to making new highs soon. Enjoy!
Over and Out,
Your Profit Pilot