A Look Back At Last Week Via The 30-Minute Charts

I actually missed this development until a reader pointed it out to me, but Friday’s action seems to ‘make more sense’ when viewed through the 30-minute chart.  As a bonus, this timeframe allows us to see the broad picture of the whole interesting action of last week.  Let’s look.

DIA (DIA) 30-min chart:

The blue vertical line represents the ‘divider’ between weeks.  Monday gapped open after a definitive positive momentum divergence and reversal, but ended up being nothing more than a vicious “Bull Trap” that zapped a good deal of short-sellers and drew in some buyers only to have the market reverse sharply on them.

Tuesday gapped down, drawing in sellers and removing buyers… only to have it reverse on them with a major (that really wasn’t so “major” when compared to Thursday’s rally) reversal that took price to confluence EMA resistance… and set up the week’s second “Bull Trap.”

Price then unfolded in trend-day momentum fashion to the downside through all of Wednesday and virtually all of Thursday… until price hit technical support and funds began to trigger buy orders (apparently) into the market, causing volume to surge to very high levels as price rallied from DIA value $80 to $89, or roughly 900 Dow Jones points in half-a-day’s time.

Friday’s action stalled early at the 200 period SMA and just above prior resistance from Tuesday’s trading highs before falling sharply into  EMA confluence support (green arrow) and forming a “Rounded Reversal” pattern that took price back to the 200 period SMA (on the 30-min chart) which was also roughly the same price as the falling 20 day EMA (on the daily chart).

Such timeframe confluence moving average resistance proved to be too much for eager buyers to overcome, and price fell sharply and more violently than expected into Friday’s close.  One could argue a short-term ‘double top’ has formed as a result.  Notice also that the price on Friday afternoon made a marginal new high on a rather significant negative momentum divergence - a reader properly noted that gave him cause to believe the new highs were unsustainable.

Last week virtually had it all in terms of successful and failed classical trade set-ups.  I suggest you go back and analyze the week through charts using your own method to see what insights you can glean from the action.  Trade small if need be and guard your capital as best you can (though don’t necessarily put it under your mattress).

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