The markets pushed through a very tight consolidation area that we have seen developing over the last few days. Expectations were for the markets to move more sideways going into last week's U.S. holiday, so we weren’t too surprised that we ended up with a very tight basing pattern. Today’s move could be considered a breakout of a short-term basing pattern. However, these basing patterns did develop over a light week of trading, including a half session last Friday.
All three majors are still well below their high resistance levels set this past summer and we still expect to see range-bounding stocks through the year-end. The development of this small basing pattern over the last few days could create a shorter-term bullish opportunity. We should still respect the overall market's range; however, taking advantage of bullish surges and bearish corrections can prove profitable.
Timing will be the biggest factor for those who are willing to try and take advantage of smaller directional moves. Keep your exposure in mind over these shorter-term trades, as over-trading can become a problem. Range-bounding stocks, in the long-term, can also yield some good returns to the sideways player. Being patient and allowing stocks to move back and forth between support and resistance levels can be less labor intensive, but will test your discipline and your initial trade setup.
Have a great night,
Maverick Trading
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