Tuesday April 26, 2016
Key Developments :
- Overnight upside target acquired.
- Choppy Consolidation day ahead of the fed after that.
- ES Futures pointing to higher prices
- Russel Breaks out of range to the upside and sees follow through.
Although today seemed like a very choppy consolidation day if you were only watching the S&P 500, the Russell thought otherwise. As I have been tweeting about, that Russell range was and still is very likely to give us the direction of our next move and right now, that looks like up. Without an epic failed breakout (which we can’t rule out, with good risk management) this market is headed higher. Here is what I see in the price action that leads me to that thesis.
Looking simply at the 30 minute chart of the ES Futures, we see a multi-day inverse H&S ahead of the fed. A breakout above 2091.25 would target 2111.50. I went out long from the 2080 area. Up here, you probably want to see the 2091.25 area become support to give you a better risk reward, but It does look like it’s going higher.
However, I think the more important thing to analyze, which we don’t usually do, is the Russell. When the Russell is breaking out, that tells us Risk is on. And if risk is on, it will drag even the laggard Nasdaq with it.
Today, Russel broke out. I tweeted about this several times yesterday. And trust me I watched it all day.
Now the most important thing about this breakout is not just the breakout. But it re-tested the breakout area and that area became support. Take a look at the 2nd chart below.
This is the price action after the breakout. The greyish box is the range and this is showing the intraday price action around that level. Notice how we formed and broke out of an inverse H&S pattern and took out the breakout high. That is follow through and we want to see it continue into the target of 115.76. We will use today’s inverse H&S low as an area we think we are likely wrong. i.e back below 114.10ish.
The Bottom Line:
The market has price action setups targeting higher prices ahead. Using the patterns, the risk level are well defined and we know what to look for. AAPL chunked earnings so that may be a wild card in the morning, but the price action will lead the way.
Chart of the Day:
AAPL – Technicals agreed. I was bullish from 97 to 105. And then turned bearish at the 61.8 fib. I still think it can see 80. Here is my blog post from early April.