Mon 03_18

today's trade

A key for the above chart to define the horizontal lines and dots.  For further explanation, see this link:  

Indications of trade opportunity

A breakdown of where we are:

The Daily: gap down price pullbacks that show closes off of the lows (likely short covering as price has yet to scare out larger positions).  Coming into the 20-day MA which coincides with March 5th gap ($153.65 area).  3/10macd anticipation of 1b-1a (continuation of prevailing trend) or 2c (deeper pullback).

A slight timeframe faster, the 130min (3-bars per day) showing 2c and trading between the 20- & 50-period MA's.  Price needing to recover $155.50s, potential steeper pullback to $154?

65min: 3/10macd showing potential 3-push scenario, which can mean an inverse H&S or the potential for a lower low but on lighter momentum.

30-min showing a little clearer the inverse Head & Shoulder potential.  Also, the 3/10macd shows potential for the 3d criteria long setup (Using the 130min paired with the 30min you would have a 2c-2d criteria higher time frame with 3d criteria faster time frame which I treat as bullish.  Still, you would need the 30-min fast line to go green for an entry).

Also worth noting price trading under the 5- & 10-DAY moving averages (purple and black lines respectively).

Basically looking at $155.50 above to be bullish.  Further bearish behavior I'd be looking towards the $153.65 support while giving some credibility to potential double bottom support near today's lows.

Reverse Divergence

The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it.  I use this criteria as a way to alert me to an existing condition of price.  I trade the 15-minute time frame with the 5-minute to trigger me into a trade.

The 2c condition presented itself in the SPY today, leading to a reverse buy divergence (higher low in price with a lower low in momentum, often occurring in condition 2c).  There wasn't a solid "trend" today (for my time frame) like there was last week, but price spent these past two sessions pulling back to a mean (20- & 50-period Averages) following the recent downward momentum which started off the week.
Some things which may be be present for a buyable 2c setup:
- 3-pushes to a low, evident on the 5-min time frame, often resembling an inverted Head & Shoulders pattern. 
- The 3d setup on the faster time frame (look for a measurable seed wave).
- An orderly trend down which is broken, leading to price discovery back to a significant breakdown point.

There was upward momentum (gap above previous day's High) off the open this morning which spent the early afternoon pulling back.  This pullback found support at the 50% retracement level as measured off of the previous day's Close to today's Open.

3-Push

An example of the 3-push setup (A setup highlighted in Linda Raschke's book Street Smarts (also known as Three Little Indians, Three pushes to a High (or Low), etc.
The SPY almost had two of these setups today.  However, the first 3-push move didn't make a lower low on the 3rd push, thereby creating more of an inverse H&S instead (notice the 3d criteria which often draws your attention to a right shoulder for this setup).  The actual 3-push came at the highs of the day and with a day where buyers are in control it's always best to short a retrace once momentum has shown itself rather than the initial trend line break.

Instead of taking the SPY short I actually entered TZA long based on the 15-min 3d setup (and the 3-push short setting up on the SPY AND the TZA showing a 3-push pattern on the 15-min chart).  There are two arrows marking possible triggers to entry, my entry was actually on the 50% retracement level.  Exited half at the 50% projection while the 100% projection missed by 8-cents so the other half was taken off as price went under the bearish red inverted hammer candle on the 5-min.