Trading Plan For Next Week

For next week I think the only realistic scenario is bearish scenario for stocks, so I'm going to mostly focus on this case. Although I don't believe market will give us a clear buy signal any time soon, I'm still going to post a bullish scenario also, just in case something surprises us. I have no intention to trade precious metals in light of strong dollar (and I don't short bull markets), so no plan for PM sector. As usual, I'm going to look at particular stocks when I get some confirmation from the market.

Bullish Scenario For Stocks:

• A perfect bullish scenario would first print a two day reversal, which can be seen as a hammer candlestick on a two day chart.
• Following this reversal should be an immediate break above the 1295, which has now become resistance.
• A test of the same line should be on very low volume to confirm there was no selling into the breakout.
• Every high quality test should immediately be followed by a follow through day, which is a high percentage gain day on big volume.

As I said, I don't believe a bullish scenario will reveal, but if we get a decent break above 1295, I'll start analyzing potential stocks to buy.

Bearish Scenario For Stocks:

• First of all, a good looking bearish scenario should not exhibit any kind of bullish reversal. A low volume rally without any kind of background accumulation would denote that.
• The second step is optional, but in order to complete a bearish reversal in its full power, a marginal break above the 1295 is necessary, as this would trap many bulls as I discussed in my previous post. This break should immediately be followed by a burst of selling, which would push a daily close below the support line. If I see anything similar, I will probably open some short positions at once.
• The next day all that is needed is some more follow through to the downside on increased volume.

As always, don't expect that any scenario will reveal exactly as displayed on my drawings. They are only a framework of reference of what may happen. If any of the scenarios starts to reveal early next week I will post updates to keep you on the right track. Until then, be patient and wait for the right opportunity.

Good luck!