The “Coiled Spring”

Are the Markets Setting Up for Big Move?

By Bryan Bottarelli
Wednesday, April 09, 2008 9:56 AM EDT
Wed, 9 Apr 2008 13:56:00 GMT

Dear Bottarelli Research Member,

Once again, we’re beginning another trading day with moderate choppiness. If you look at the chart of the Dow Industrials below, you’ll notice that we’ve now experienced six (6) trading days in a row where the day’s close has come within points of the day’s open. When I see chart formations like this, they often times set up for something I call the “coiled spring” effect. In other words, these tight trading days — all occurring in consecutive trading sessions — are indicating that the market is coiling itself up. Each day gets tighter and tighter, and when the spring finally snaps from the pressure, you most likely witness an aggressive move to the upside or to the downside.

INDU

Now, as I’ve been saying, the ideal situation would be a move lower — which successfully re-tests of the Dow’s 50-day moving average. Once the averages have established strong support at this critical level, then we can expect an explosive move to the upside. But of course, it’s anyone’s guess whether or not this well-scripted scenario will come to pass. So in the meantime, we’re left in a holding period. Now as you know, I won’t hesitate to issue any new plays that place high odds of success in our favor, but the predominant technical reading right now is gauging the market’s next directional move. And until we have some clues as to the direction of this move, it’s smart to play it tight to the vest. So until further notice, I’ll continue to chart & monitor the movements and isolate potential play opportunities. And until something strong pops us,

Lock and load

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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