Monday April 25, 2016
Key Developments :
- Another day, another bear trap
- Bears Fail to take advantage of larger reversal pattern setup, but Bulls not out of the woods yet.
Some very interesting price action today. With this mornings gap down, it looked as though the Bears were going to have their way to start the week and maybe push this market down ahead of the Fed on Wednesday. But Bulls thought otherwise. Forming a bullish reversal pattern (seen above inverse H&S), which took us back above that bearish neckline and quickly acquiring it’s target at 2086.50. We spent the next couple of hours consolidating that rebound right around that neckline. Until a double bottom formed just before the 3:30 Ramp and triggered a 2nd bullish pattern targeting 2095.48. I don’t love to hold intraday patterns that don’t complete so I went out flat after being short this morning and flipping long into the close. A flattish open (although unexpected) would be nice as it would give us opportunity to re-position into that 2095 target. However, gun to my head we will be there by the time this market opens tomorrow.
When trading the inverse H&S pattern, I always prefer to find a low risk entry in anticipation of it, by shorting up in the right shoulder. The reason for that is that days like today can happen. I began shorting in the later part of the first 15 mins, and my plan was to use the 15 min high as my out. It worked out very well. I was anticipating the breakdown, we got it, but we didn’t get completion. That is okay, as we were able to lock in a small gain with low risk entry while many that were shorting the neckline were take out likely for a loss. Here is what I mean.
It would not suprise me to see a move back into 2095 on the SPX tomorrow morning, but the bulls will not be out of the woods yet. Even with the completion of the cup/handle into 2095, we could still be looking at a bearish pattern to work with ahead of the fed. So do keep that in mind.
The Bottom Line:
The bulls defended another neckline today and remain in control of this tape. Keep an eye on out for the completion of the bullish cup/handle into 2095, or a brakdown below today’s low of 2077.50, which would once again trigger the bearish pattern. As Always, I will do my best to tweet what I see, so make sure you are following me.