Abet Chichi2

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Tips for today's trading ,by Paul Cherney.
.......For FOMC announcements, the intraday pattern most often seen is that the initial knee-jerk reaction in prices after the announcement proves to be the direction for the rest of the session, but the first move usually reverses and prices run the other way for a while before they reverse again and finish in an intraday trend in the direction of the first knee-jerk reaction. I don't know whether this will happen on Tuesday, but when you think about headline positions (ultra short-term leveraged bets on the direction of the first price reaction to the headline), there is at least one rational explanation: The first knee-jerk price movement puts either the bulls or the bears into the money, and prices can get a boost in the direction of the initial move by wrong-way bettors closing out wrong-way bets. Once momentum in the opening direction appears to be weakening, the correct-way bettors start booking their profits and prices can reverse again.

Here's an example. Suppose the first reaction is a bullish spike higher. Bulls who are ultra-short-term long are "in the money" and bears are frantically trying to limit losses by buying to cover their shorts, this buying demand pushes prices further in the same direction as the initial knee-jerk (very rapidly), but once the move appears to have run out of intraday momentum, the bulls want to book their profits, so they starts to sell which reverses prices again.