How to Trade Three Inside Down PatternsHow to trade three inside down patterns with entries and stop levels.
Threeinsidedown
S&P500 Weekly Topped... Set for a FALLThe past week appeared to be well until Friday, when the 'US equity markets pulled back hard suddenly (after Biden's release of stimulus details, on the contrary).
The turnaround was highlighted as it happened, see linked idea.
Now that the week is done, the technical outlook strongly suggest a top in the S&P500 ES1! futures. Candlestick pattern formed is known as the inside candle, the first part of a Three Inside Down, typically seen at tops... and yes, the incoming week, should end down to complete the pattern. IF it gaps down on Monday open, then it would be shifting the bearish bias further in.
The last time we saw something similar was about a year ago, at the onset of global pandemic realization. What followed was a massive slide down a very slippery slope.
Despite worse off (economic) conditions than a year ago, the index is higher than when all these started. And taking into account the current global situation, we find ourselves in a larger global Wave 2 , just surpassed 2 million deaths globally on Friday.
That is the first and most obvious divergence.
Other technical divergences are apparent, with the MACD and MACD Histograms clearly indicating that this bull run is not sustainable by any measure.
The Relative Price Indicator shows a clearer divergence, having just crossed down.
A pertinent point on this chart is that over and above the clear divergence, price moved out of the daily Bollinger Bands and just got pulled back in. At the very least, this action tends to have a typical movement over to the other Bollinger Band, placing the first downside target at about 3600, then next stop at 3200.
Watch as the week develops... For those not invested, it is going to be a very good real time example, especially if you see how it develops fractally over the daily chart, the 4H and 1H chart. For those who are invested, it is perhaps time to review, and draw some lines, maybe do some hedging plans, etc.
Have a great week ahead!
