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by Austin Passamonte
An expanding wedge coupled with a narrow-range channel spelled imminent action for the S&P.
Position: N/A
Austin Passamonte
Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum
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BROADENING FORMATION
Ranged Break
05/30/07 09:27:00 AMby Austin Passamonte
An expanding wedge coupled with a narrow-range channel spelled imminent action for the S&P.
Position: N/A
| Heading into a holiday weekend is usually light volume, bullish market action. The Standard & Poor's 500 shot up above its all-time closing high each day this week, only to close slightly below at the end. It seemed to be a given that big-money players would hold that historical print past the close. See Figure 1. |
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| FIGURE 1: S&P 500 EMINI FUTURES (ES) |
| Graphic provided by: TradeStation. |
| |
| Logic and reason have little to do with financial market action in general, trading in particular. Thankfully, we have technical analysis to measure our way through pending price action. |
| From Monday through Wednesday, the S&P 500 (emini futures shown) held within a sideways range of less than 10 index points. That type of comatose market (in)action simply cannot last. When it breaks, the directional burst is usually substantial. |
| In the process of channeling sideways, the index also formed an expanding wedge pattern, which is bearish. Instead of coiling into a consolidation pattern of stored energy, an expanding wedge is literally expending energy. When the pattern breaks, it is usually downside. |
| A bearish overall price pattern coupled with small-range, sideways price action had stock indexes poised for a directional push. Once it broke, sell signals from 1525 down to 1515 offered numerous intraday short trades in succession. The S&P has a habit of forming multisession, constricted sideways channels just like this. We'll see the same general setup again down the road and will trade it accordingly. |
Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum
| Title: | Individual Trader |
| Company: | CoiledMarkets.com |
| Address: | PO Box 633 |
| Naples, NY 14512 | |
| Website: | coiledmarkets.com/blog |
| E-mail address: | austinp44@yahoo.com |
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