HOT TOPICS LIST
INDICATORS LIST
LIST OF TOPICS
In my Traders.com Advantage article "Another Bearish Sign on SPY?," I discussed the definite bearish head & shoulders top pattern with a breach of the neckline through a gap that made the pattern more bearish on the April 18th hourly chart. However, in the two days after the breach, something happened (Figure 1). |
FIGURE 1: SPY. Two-hour chart of the S&P 500 Trust ETF showing head & shoulders top failure. |
Graphic provided by: http://www.freestockcharts.com/. |
|
SPY not only broke up through the H&S neckline on April 19, the stock gapped up more than 1.2% April 20 on positive earnings and higher inflation expectations. The good news for bulls is that the bearish scenario on the short-term breach of the neckline was invalidated. |
For proactive traders, a chart pattern failure is as good a signal as a confirmation. It broadcasts that its time to become bullish has again been confirmed. However, the SPY upside gap on April 20 will need to be tested and the volume at price resistance level at 133.30 will need to be decisively broken on above-average volume before this author would consider making a bullish bet. |
The moral is that patterns in short time frames have very short-term implications. With reversal patterns like the head & shoulder, the longer time frames like daily and weekly are more reliable in signaling a market reversal. And like all patterns, confirmation is key. |
Company: | TradeSystemGuru.com |
Address: | Box 2589 |
Garibaldi Highlands, BC Canada | |
Phone # for sales: | 604-898-9069 |
Fax: | 604-898-9069 |
Website: | www.tradesystemguru.com |
E-mail address: | indextradermb@gmail.com |
Traders' Resource Links | |
TradeSystemGuru.com has not added any product or service information to TRADERS' RESOURCE. |
Click here for more information about our publications!