SHORT TERM SHORT TRADE ON SPY
Medium to Long Term Outlook - Bullish
Short Term Outlook - Bearish
Bullish lower channel line in green, based on daily chart.
Reason for Short trade now:
1. Rally up to upper bearish channel line (red)
2. "Pop and Drop" price action pattern (my definition, lower low immediately followed by a one leg higher high)
3. 2 leg pullback off lower low (AKA second entry)
4. Higher high on bearish volume (net OBV is -4 million shares between last swing high and current swing high), indicating more selling than buying during this rally.
5. Resistance seen above current rally, showing confluence of resistance with the upper red channel line
6. Descending triangle pattern after 3 prior tests, meaning that there are probably a lot of stops just below this level, so if price can breakdown through this level, then it will probably be a strong and quick move.
7. No follow through on last 2 white bars (volume reduced and inside bars)
Entry - break of swing low
Initial stop - above swing high
1st target - measured move (AB=CD) down to $194.86
Runner - down to green bullish channel line, around $191
Note: if there is significant demand approaching the lower blue support level, then tighten stop. But if able to break this level (ICE - Wyckoff), then further weakness should continue down to the bottom of the red channel, probably all the way down to the bottom of the green bullish channel line, around $191 level.
Short Term Outlook - Bearish
Bullish lower channel line in green, based on daily chart.
Reason for Short trade now:
1. Rally up to upper bearish channel line (red)
2. "Pop and Drop" price action pattern (my definition, lower low immediately followed by a one leg higher high)
3. 2 leg pullback off lower low (AKA second entry)
4. Higher high on bearish volume (net OBV is -4 million shares between last swing high and current swing high), indicating more selling than buying during this rally.
5. Resistance seen above current rally, showing confluence of resistance with the upper red channel line
6. Descending triangle pattern after 3 prior tests, meaning that there are probably a lot of stops just below this level, so if price can breakdown through this level, then it will probably be a strong and quick move.
7. No follow through on last 2 white bars (volume reduced and inside bars)
Entry - break of swing low
Initial stop - above swing high
1st target - measured move (AB=CD) down to $194.86
Runner - down to green bullish channel line, around $191
Note: if there is significant demand approaching the lower blue support level, then tighten stop. But if able to break this level (ICE - Wyckoff), then further weakness should continue down to the bottom of the red channel, probably all the way down to the bottom of the green bullish channel line, around $191 level.
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