S&P500 (SPX) New All Time High or Further Drop for AccumulationHello Fellow Trader!
S&P500 (SPX) New All Time High or Further Drop for Accumulation
SPX found support at its previous all time high price 3394 before bouncing and looking to test new highs.
There are two options in play to trade this structure and the higher risk to reward play would be testing the June 2020 high 3232.
Scenario 1:
IF price forms some type of flag or continuation pattern for further upside, the multi-month trend line will stay intact as support for price to advance.
Scenario 2:
IF the current structure looks like a consolidation pattern hugging above trend line, this could suggest there is a possible drop to test June highs. At this point you will find mass accumulation.
Key Points:
Scenario 1:
- Price above 50 EMA
- Price above 200 EMA
- Multi-month trend line as support
- 1 Hour time frame could present bullish flag patterns or candlestick reversals for upside
- SPX has been extremely strong, and any dip pull backs have been bought up immensely
- Trading the trend.
- Found support at 38.2% Fibonacci of last major range
Scenario 2:
- RSI slices through mid-point
- A consolidation pattern above trend line suggests the buyers are wearing thin.
- Accumulation zone will coincide with 200 EMA support & June high resistance / new support.
- Accumulation zone coincides with 50% Fibonacci retracement of last major range
- Presents an extremely desirable risk to reward ratio
Key Levels:
Support – 3394, 3280, 3232, 200 EMA
Resistance – 3480, 3588
Entry Zone:
Optimal entry provides the greatest reward to risk ratio while supporting entry is a zone for reversal signals.
Scenario 1:
Optimal Entry – 3394
Supporting Entry – 3420
Scenario 2:
Optimal Entry – 3250
Supporting Entry – 3320
Candle Reversals for entry
- Bullish Hammer
- Bullish Engulfing
- Bullish Piercing
The Risk:
As traders, it is your job to mitigate the risk and only trade structures that provide high probability and great reward to risk ratios.
If you are not comfortable with defined exit levels, experiment with Moving Averages to help set solid exit rules to protect your capital.
Scenario 1: IF: Price breaks below the trend line / 3350– this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.
Scenario 2: IF: Price breaks below 3199– this would suggest the structure is not in our favour and would be wise to reduce exposure or close the trade until a solid signal gives us reasons to re-enter.
Reward / Reward Targets:
Scenario 1:
Optimal Entry 3394– Target 1 3588= 5x Reward to Risk
Supporting Entry 3420 – Target 1 3588 = 2.3x Reward to Risk
Scenario 2:
Optimal Entry 3250– Target 1 3588 = 6.7x Reward to Risk
Supporting Entry 3320 – Target 1 3588 = 2.3x Reward to Risk
My plan is to touch base with this second scenario if it presents and create the new trading plan if any variables present. This trade could be extremely potent.
