By: Christopher Lewis
The European Union had elections over the weekend in Greece, France, and Germany. While some of the election results were expected, some of the results in Greece had people concerned around the investing world as many of the new parliament members elected to go to Athens are stringently anti-austerity. In fact, when looking at all three elections, there was one running theme: A dislike of the austerity measures in Europe. In short, the austerity deals are probably in serious trouble.
The market has been one that continues to look weak, but has frustrated traders who chose to sell over and over again. The Monday session was more of the same, as the gap down originally looked like the support level finally gave way. This was the signal that many sellers would have been waiting for. However, by the end of the day, that old familiar feeling must be coming back to the bears.
Gap filled
The gap that the market produced on the open has been filled, and now the real question is going to be whether or not the gap holds as resistance like it normally will. This is the most important question, and there are two different ways to trade this market at this point in time as far as I am concerned.
The first option is to simply sell at these levels, knowing that if we get above the 1.31 level, the gap has given way, and the momentum is bullish again. (However, it should be said that we would only be setting up to sell off yet again at this point.) This is the more aggressive move, and one that I would consider on an hourly shooting star or weak candle in general. The main advantage of this is that the stop can be very tight.
The second option is to play more conservatively, and simply wait for the daily close below the 1.30 level that we have been waiting on for so long now. This would prove the gap to hold, and show a sustained attack on serious support. I am choosing the aggressive option if I get a chance, but this second option surely is a solid one as well since the move would more than likely be down to 1.26 or so.