Are We Setting Up Another Popped Gap Play Like March 9?

Mar 22, 2010: 8:34 AM CST

One thing I’ve been trying to highlight lately in these intraday ‘update’ posts is the repetitive character or nature of some of the price patterns that have occurred… which have been virtual road-maps to the future.

And they always say “Those who do not learn from the mistakes of the past are doomed to repeat them.”  A corollary is that those who know the past can profit from it if history repeats.

Let’s take a quick look at a pattern that reminds me almost exactly of the same situation we saw on March 9th… and let’s see if today moves forward in a similar fashion to that pattern.

First, the March 9 “Gap Down” then “Popped Stops” Pattern:

Without getting too detailed, the most important thing to notice is that price gapped suddenly down off the open, breaking key support, but the gap down occurred on a distinct and lengthy positive TICK divergence (looking at TICK lows).

Buyers thwarted the short-sellers and pushed price up to new highs in a violent method, ripping the stop-losses from the aggressive short-sellers/bears.

Could that be happening in a similar matter this morning?  So far, yes:

This is Friday’s action as it carries forward this morning, and we’re seeing a very similar if not identical pattern of sharp gap down into positive TICK divergence (this time with a positive 3/10 Momentum Divergence).

What’s a trader to do?

Look to the past, see what happened last time, and trade accordingly… meaning do not keep holding short above the $116.00 level thinking the market will sell off (in the event the market rips sharply higher) and alternatively, aggressive traders can try to profit from the earlier pattern, trading long if prices continue rising and complete the pattern (which would mean sharp new intraday highs).

Let’s see how the day plays out and how we can profit should the pattern unfold exactly… or guard our risk if the pattern changes.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

7 Comments

7 Responses to “Are We Setting Up Another Popped Gap Play Like March 9?”

  1. JeffreyLin Says:

    well i guess this isn't a “post expiration” correlation or “mutual fund” monday correlation as March 9th was a Twosday!

  2. Corey Rosenbloom, CMT Says:

    That's true!

    The market as of late has been very 'pattern friendly' in terms of history repeating, sometimes from one day to the next.

    It keeps us on our toes!

  3. JeffreyLin Says:

    I have 3 letters for you: PPT 😉

  4. clemstar Says:

    Talking of repeating patterns, have you noticed how similar the current daily chart pattern in the S&P500 is to the period between July and October 2007. Will it resolve itself in similar fashion to 2007 I wonder? Time will tell…

  5. clemstar Says:

    Talking of repeating patterns, have you noticed how similar the current daily chart pattern in the S&P500 is to the period between July and October 2007. Will it resolve itself in similar fashion to 2007 I wonder? Time will tell…

  6. Intraday Reversal and Popped Stops Example June 3 | Afraid to Trade.com Blog Says:

    […] March 22: “Popped Stops Gap Play” […]

  7. Intraday Reversal and Popped Stops Example June 3 Says:

    […] March 22: “Popped Stops Gap Play” […]