#13 September 2, 2011 REBOUND AFTER BREAKOUT AND SAUCER CONSOLIDATION

The market had witnessed a sharp downtrend from a record high followed by an extended, narrow consolidation. This consolidation led to the implied downside breakout. However, market then rebounded back into the consolidation and formed a small saucer pattern near the top of the rebound and well within the prior consolidation. The ability of the market to rebound back into the consolidation and then form a narrow saucer consolidation suggested the potential for a near-term upswing. Went long the consolidation at night. The market rallied sharply the next morning. Raised stopped by 200 points and was stopped out that same morning. $2300 per contract profit in overnight trade, which risked $300 to stop point.

Lesson: Rebounds back into prior consolidations followed by narrow consolidations may provide signal of impending short-term continuation move.