My First TA Post EVER: Possible Head and Shoulders Pattern
Updated
Hey Folks,
I’m going to go ahead and give this technical analysis thing a shot, lol. I am relatively new to trading and thought this might be a fun and helpful way for me to journal/reinforce my TA while getting feed back from a community of like-minded people – so here we go!
KEY POINTS
-Support levels of $430-$427 have been decisively broken through. Next area of support is $420-$415.
-The price action has reached the base (neckline) of the head and should pattern. This is where the pattern will most likely play out. Down is the likely direction especially since there are no reversal indicators in sight
-Head and shoulders pattern appears to have formed. According to Investopedia “The head and shoulders pattern is believed to be one of the most reliable trend reversal patterns”
-RSI on the daily chart is at oversold levels but it is by no means the lowest that we have been this year. The possibility be even more oversold is not only possible but likely.
With the help of charting folk on Trading View and other YouTube traders – I’ve been able to recognize the gigantic head and shoulders pattern on the weekly chart. I even drew-up this chart. I should note that I did this about 4-5 days ago (on the 18th) and am happy to see the head and shoulder pattern playing out. However, I’m pretty upset that I have yet to capitalize on this prediction as I’ve been rocked every time I’ve played puts on the SPY - specifically on the 18th when the SPY decided to go on a mini bull rally, lol. I’m guessing I need to have more of a swing trade mind-set rather than a day-trading one. Anyways, the pattern is finally filling out and I have even noticed an uptick of other folks on the internet mentioning it – which I suspect will help to validate the pattern even more.
I am guessing that we have three options in the near future. I’ll list them in the order believe to be most likely:
Highest probability:
SPY continues its fall to next support area of $420-$415 within the next 1-3 days.
The SPY has decisively broken below the $430-$427 support area. I would like to say that after-hours slowed it down, however the price managed to fall three more dollars. The market close temporarily stopped the falling at $424.23 with an RSI of 37.09 (on the daily chart). The SPY has been this oversold at least 3 times this year (Feb 24th, Jan 24th, and Jan 10th). With every one of these extreme drops – it has done an equally extreme bounce. However, this was by no means the most severe drop in RSI – which reinforces the idea that is possible for the sell off to continue. Furthermore, there has been no indication (that I could see) of a reversal on any time frame – not the 5 min, not the 4 hour or the daily. There were no hammer candles, no dojis – nothing. I think it is likely that we continue to fall to the next support area of $420-$415. The best advice I can give to myself or anyone else considering trading this stock is to be aware that the price action at the moment is extremely volatile and high risk - trade with caution, lol.
Less probable but still in the cards:
SPY bounces on Monday, test the now resistance area of $427-$430 however, is rejected and continues its fall to the support area of $420-$415.
All this, considering that bears are content with their massive gains they’ve made the past two days, lol.
Least likely possibility:
SPY does the complete opposite of what the entire market thinks it’s going to do and rockets up past the previously broken support levels of $427-$430. It then retest the $436 area.
Well, that’s all I’ve got folks, lol. That sure was a lot. However, I’m quiet happy with this exercise – I’ve never had to look at a stock as closely as this before. I think this sort of practice would make anyone a better trader. More importantly, I hope I get some feedback from you guys – it’s the reason why being part of a community like trading view is so awesome. Best of luck to everyone.
Happy Trading,
Dan
I’m going to go ahead and give this technical analysis thing a shot, lol. I am relatively new to trading and thought this might be a fun and helpful way for me to journal/reinforce my TA while getting feed back from a community of like-minded people – so here we go!
KEY POINTS
-Support levels of $430-$427 have been decisively broken through. Next area of support is $420-$415.
-The price action has reached the base (neckline) of the head and should pattern. This is where the pattern will most likely play out. Down is the likely direction especially since there are no reversal indicators in sight
-Head and shoulders pattern appears to have formed. According to Investopedia “The head and shoulders pattern is believed to be one of the most reliable trend reversal patterns”
-RSI on the daily chart is at oversold levels but it is by no means the lowest that we have been this year. The possibility be even more oversold is not only possible but likely.
With the help of charting folk on Trading View and other YouTube traders – I’ve been able to recognize the gigantic head and shoulders pattern on the weekly chart. I even drew-up this chart. I should note that I did this about 4-5 days ago (on the 18th) and am happy to see the head and shoulder pattern playing out. However, I’m pretty upset that I have yet to capitalize on this prediction as I’ve been rocked every time I’ve played puts on the SPY - specifically on the 18th when the SPY decided to go on a mini bull rally, lol. I’m guessing I need to have more of a swing trade mind-set rather than a day-trading one. Anyways, the pattern is finally filling out and I have even noticed an uptick of other folks on the internet mentioning it – which I suspect will help to validate the pattern even more.
I am guessing that we have three options in the near future. I’ll list them in the order believe to be most likely:
Highest probability:
SPY continues its fall to next support area of $420-$415 within the next 1-3 days.
The SPY has decisively broken below the $430-$427 support area. I would like to say that after-hours slowed it down, however the price managed to fall three more dollars. The market close temporarily stopped the falling at $424.23 with an RSI of 37.09 (on the daily chart). The SPY has been this oversold at least 3 times this year (Feb 24th, Jan 24th, and Jan 10th). With every one of these extreme drops – it has done an equally extreme bounce. However, this was by no means the most severe drop in RSI – which reinforces the idea that is possible for the sell off to continue. Furthermore, there has been no indication (that I could see) of a reversal on any time frame – not the 5 min, not the 4 hour or the daily. There were no hammer candles, no dojis – nothing. I think it is likely that we continue to fall to the next support area of $420-$415. The best advice I can give to myself or anyone else considering trading this stock is to be aware that the price action at the moment is extremely volatile and high risk - trade with caution, lol.
Less probable but still in the cards:
SPY bounces on Monday, test the now resistance area of $427-$430 however, is rejected and continues its fall to the support area of $420-$415.
All this, considering that bears are content with their massive gains they’ve made the past two days, lol.
Least likely possibility:
SPY does the complete opposite of what the entire market thinks it’s going to do and rockets up past the previously broken support levels of $427-$430. It then retest the $436 area.
Well, that’s all I’ve got folks, lol. That sure was a lot. However, I’m quiet happy with this exercise – I’ve never had to look at a stock as closely as this before. I think this sort of practice would make anyone a better trader. More importantly, I hope I get some feedback from you guys – it’s the reason why being part of a community like trading view is so awesome. Best of luck to everyone.
Happy Trading,
Dan
Note
Damn, lolTrade closed: target reached
Holy Moly! I guess I should make a new post, lol. I'm honestly not sure how much further we go, lol. I have to go back to the charts and take a look at more support/resistance levels. Congrats to those who made some money!
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