Island Top on CDE: Short the Gap-Fill, Aim for the High-17s

Step-by-step technical assessment on CDE with a 24-hour trading plan

1. Market regime and trend structure

• Primary trend (July → mid-October): Strong impulsive uptrend from ~9 to 23.62 (10/16), characterized by multiple higher highs and higher lows, expanding ranges, and several upside gaps.
• Regime shift: Today (10/21) opened with a large downside gap (from 22.03 to 18.99) and sold to 18.02 before stabilizing around 18.48. This break decisively undercuts short-term trend supports and converts the near-term regime from momentum-up to corrective/down.
• Island reversal characteristics: We saw a notable gap-up cluster around 10/8–10/16 and a gap-down today that does not overlap the prior gap zone. This leaves a classic “island top” formation, often marking trend exhaustion and initiating a multi-session downswing.

2. Price action and key levels (daily)

• Recent highs/lows: All-time swing in this leg at 23.62 (10/16); sharp failure to hold 22–23 area; today’s intraday low 18.02.
• Support and resistance map:
  • Immediate resistance: 19.34 (10/06 high), 19.62 (Fib 38.2% retracement), psychological/round 20.00, and the bottom of the island gap near 20.6–21.0. These are likely supply zones on bounces.
  • Immediate support: 18.20–18.80 (late-September congestion and current trading band), then 17.40–17.50 (9/19 and 9/24 pivot lows), and 17.15 (Fib 61.8% retracement).
• Gaps: Today’s breakaway gap to the downside is statistically unlikely to be filled immediately; the first bounce commonly stalls at 38.2–50% of the gap distance and often becomes a “last point of supply” (LPSY) before another leg down.

3. Fibonacci framework (swing: 8/29 low → 10/16 high)

• Swing low: 13.15 (8/29) to swing high: 23.62 (10/16); range = 10.47.
• Retracement levels from 23.62:
  • 38.2%: 23.62 − 0.382×10.47 = 19.62.
  • 50.0%: 23.62 − 0.500×10.47 = 18.385.
  • 61.8%: 23.62 − 0.618×10.47 = 17.152.
• Current price 18.48 sits almost exactly on the 50% retracement (18.39), which often provides an initial pause/bounce but is less durable than 61.8% in a fresh reversal. The next high-probability magnet below is 17.15–17.40 (Fib 61.8% plus September pivots).

4. Moving averages and mean reversion

• 20-day SMA (approx.): ~19.8 (average of last 20 closes through 10/20 ≈ 19.77). Today’s close is below the 20DMA, shifting short-term bias bearish.
• 50-day SMA (approx.): Rising, but likely clustered around mid/high teens (15–16.5) given the August/September base and the ensuing ramp. Price remains above the 50DMA but has clearly broken the short-term moving average stack.
• Implication: Below the 20DMA with a negative slope emerging suggests rallies toward 19.6–20.0 face supply. A “reversion to the 20DMA” is now countertrend and should be faded until price can reclaim and hold above it.

5. Momentum and oscillators

• RSI(14) (est.): Likely slipped from strong bullish territory into the low-to-mid 40s with today’s drop. That is neutral-to-bearish, not yet oversold, leaving room for more downside after a reflex bounce.
• MACD (12,26,9): Likely rolling over with a pending or fresh bear cross as histogram flips negative after the island reversal. This supports sell-the-bounce rather than knife-catching.
• Stochastics: Rapid move from overbought to neutral/oversold zone is typical after gap reversals; expect whips on the first bounce, then another down leg.

6. Volatility and bands

• ATR(14) (est.): Elevated (~1.5–1.8) after recent expansion days. Expect 1–2 ATR moves possible over 24 hours, which supports a tactical trade for 1.5–2.0 points.
• Bollinger Bands (20,2): With 20DMA ~19.8 and heightened volatility, lower band likely in the high-17s. Price is in the lower half of the bands but not yet outside the band, which typically argues for a small bounce before any further leg lower.
• Keltner Channels: Price is likely testing/lurking below the middle line (EMA20), indicating downside channel drift with rallies fading at the midline.

7. Volume, breadth, and tape

• Distribution day: Today’s volume (~22.4M) is materially above the recent average, confirming institutional distribution behind the breakaway gap.
• OBV (conceptual): Sharp downshift consistent with a trend transition.
• Intraday VWAP (10/21): Approx. ~18.6. Late prints below VWAP suggest sellers retained intraday control into the close; the first test tomorrow of VWAP or 19.2–19.6 will be a tell for supply.

8. Intraday structure and micro setups

• 10/21 intraday range: 19.21 high to 18.02 low; most of the day coiled between 18.26–18.86 with a late-day slip toward 18.48.
• Expectation for next session open: Given the magnitude of the gap and proximity to the 50% Fib, a reflex bounce toward 19.2–19.6 (Fib 38.2% / prior pivot and VWAP zone) is plausible. This area coincides with overhead supply from trapped longs and serves as a high-probability short entry (LPSY in Wyckoff terms).

9. Pattern synthesis

• Island top + breakaway gap down: Bearish reversal pattern with statistical follow-through over 2–5 sessions.
• Lower high and momentum divergence: The 10/16 high (23.62) followed by a failed retest near 10/20 (22.03) telegraphed momentum fatigue. MACD/RSI deterioration fits the reversal playbook.
• Wyckoff lens: UTAD (10/16), then SOW (today’s gap down), now likely LPSY on the first bounce (target 19.5–20.0) before a mark-down toward 17s.

10. Elliott wave framing (heuristic)

• Impulsive 5-wave up likely completed at 23.62. Current decline is wave A: sharp, gap-led. Expect B: partial gap fill to ~19.6–20.0. Then C: continuation into 17.2–17.6 region (Fib 61.8% + September support cluster).

11. Scenario map for next 24 hours

• Base case (60%): Early bounce toward 19.2–19.6 meets supply; price rolls over into afternoon/next session targeting 18.0–17.6.
• Alt scenario (25%): Weak bounce capped near 18.9–19.1, then quick breakdown through 18.2 to tag 17.8–17.5 in one extended move.
• Low-probability scenario (15%): Bullish surprise squeeze above 19.8 that challenges 20.2–20.6. Given the island gap and distribution profile, sustained trade above 20.6 would be needed to negate the short setup.

12. Risk/Reward and trade location

• Short-the-bounce offers superior location: Selling into 19.5–19.6 aligns with Fib 38.2%, prior pivots, and anticipated LPSY. It allows a tighter invalidation (above 20.2–20.6) and room to harvest a 1.8–2.0 point move to 17.6–17.8 (≈1–1.2× ATR) within 24 hours if momentum persists.
• Shorting breakdowns at 18.2 offers worse R:R due to nearby 17.4–17.6 supports and the risk of whipsaw if a bounce materializes first.

13. Confluence summary (bearish)

• Island reversal + breakaway gap down on heavy volume.
• Below 20DMA; MACD rolling over; RSI neutral-bearish, not oversold.
• Strong overhead supply between 19.6 and 20.6 (Fib + gap base + prior congestion).
• Next meaningful supports 17.6 and 17.15 (Fib 61.8%).

Actionable view for next 24 hours: Favor Sell (Short) into the 19.5–19.6 gap-resistance area, targeting 17.6 on follow-through. If no bounce, patience is warranted rather than chasing into support.

Decision: Sell (Short Position)

• Rationale: High-probability LPSY at 19.5–19.6 with clear invalidation and multi-signal bearish confluence.

Trade parameters

• Open (Sell limit): 19.55 (within the 19.2–19.6 supply pocket and near Fib 38.2%).
• Close (Take profit): 17.60 (above the 17.40 pivot cluster and just above Fib 61.8% at 17.15 to increase probability of fill).