The S&P had a good week considering that for most of the week it went sideways to slightly creeping up. Always be weary of creeping markets (they can either stall out and reverse fast or pop to the upside out of nowhere).
Are we headed for another leg up (for a potential melt up), are we going to cool-off this week? I do not try to guess which way the market will go and instead I focus on what the market provides me.
This week might provide some volatility because in the U.S. the electoral college officially nominates the President and there is the potential for vaccine approval by the FDA.
I do not believe the lockdowns, unemployment or the virus will have the same impact as it did in February/March because we know about these things and we expect them to continue into next year. Also, I think the economy has adapted and will continue to adapt as we wait for the vaccine.
Lastly, the news is just an excuse to associate something to the stock market. At the end, the market is going to do what it is going to do regardless of the news.
Here are two setups that I will be looking for:
Trade Setup #1 (buy): This is easy and straight forward. Break above 3700 (with retest) and price will most likely have another leg higher. Above 3700 and it's uncharted territory. Price has no known resistance/support areas. The key here will be to watch as price moves up, how it reacts at certain levels. Taking profit will depend on your personal trading preference. For me, I'll look for 2-3 times my stop loss amount taking profit along the way.
Trade Setup #2 (sell): Price has formed a wedge like structure and this trade tries to capitalize on a break down of the wedge. Although a valid trade, it is not a preferred trade because the trend is your friend until it is not. Technically the chart is bullish at almost every timeframe, so shorting an uptrend is not recommended. However, I will be watching the price action during the week and if I see price vulnerable, I will take this trade. Be cautious with this trade setup because it has less success potential IMO.
As mentioned in trade setup 2, price seems to have formed some wedge structure over the last several weeks. These are unpredictable, so it's better to wait to see if price breaks out or down before getting into a trade (with retest).
I do not use any indicators or complicated chart patterns because I feel those provide lagging false signals. Instead, I focus on support and resistance lines. This has served me well and has provided me good trade entry signals and profitable trades.
Never play the breakout, always wait for the retest and resumption. Breakouts are a losing man's trade because price more times than not, will come back to the breakout/breakdown area for a retest. The retest is your opportunity to pounce.
Elliott wave Theory is calling for 381. If you do the megaphone pattern in a LOG scale, you will find 381 is a perfect match....for the backtest and "top"
XYZ-Trader-
⋅
@mjmassens, Thanks. If this thing has another leg up, I'll keep 381 in mind.
mjmassens
⋅
Are you looking at 3643 or 3655 area for the breakdown if it comes? I would imagine the low from that flash crash would be the support line.
XYZ-Trader-
⋅
@mjmassens, If the breakdown comes it would align with losing any support around the 3655 range.
Lifesave3
⋅
As usual, your experience over the years of successful trading helps me trade simply and manage risk effectively. Your chart takes the complexity out and focuses on support and resistance with the cautionary re-test of each key level before clicking the mouse on a trade is so wise.
XYZ-Trader-
⋅
@Lifesave3, Thank you for the kind words. I'm glad I can help provide some clarity in your trading. Good luck with the coming trade week.