Analysis: S&P False Hourly Breakdown – 3 Trade Ideas

by Chart Analysis

08

November, 2016

After nine consecutive days of losses that drove prices to break down from a large hourly triangle, the S&P roared back today with a decisive close inside that triangle.  This negates the short term bearish bias and positions us firmly back into no-man’s land – with a bullish bias.

This price action is exactly why we like Peter Brandt’s mantra of “strong opinions, weakly held.”

The triangle breakdown last week was a strong brearish signal but with the current price action it is “weakly held”.  Price trumps everything!

Let’s get started with tonight’s analysis by taking a look at the hourly charts of the ES (e-mini S&P Futures traded on the CME – December contract).

ES Hourly False Breakdown - Trading Coach - Learn To Trade

The multi-month triangle is bordered by the two black lines – point A was the breakdown last week.  A close back above that level today completely negates it [the breakdown].  While the breakdown was still ongoing, price came within 10 points of the target which could be considered “closed enough” in some circles.  We did caution last week that this breakdown was occuring in the context of an up-trend and to play it close to the vest so falling short of the official target is not surprising.  However, because it fell short we still have to categorize it as a “false breakdown” or “false breakout”.

A Brief Look At Other Markets

This particular article is on the ES but because today’s price reversal was so sharp and swift we should at least take a look at what transpired in other markets. When markets opened for trading on Sunday night, almost all trading instruments gapped up or down about $1000.00 per futures contract and never looked back.

NQ: Bounce Off Support

This was the market we liked best on Sunday and posted an article about it a couple of hours before the open. But we weren’t expecting the large opening gap so unless you were trading at 5:00 pm Central Standard Time, you most likely missed out on these trade ideas.

NQ Bounce Off Support - Trading Coach - Learn To Trade

US Dollar Index: Bounce Off Support

This was another market we liked best on Sunday as well. But just like with the NQ and ES we weren’t expecting the large opening gap so unless you were trading at 7:00 pm Central Standard Time, you most likely missed out on these trade ideas.

DX Bounce Off Support - Trading Coach - Learn To Trade

Copper (HG): Extends Breakout!

HG (Copper) broke out of a triangle last week and today extended its gains substantially.  If there was any doubt about this breakout today’s price action dispelled them all.  Gold and Silver on the other hand did very little as did bonds.  Today, it was all about the indexes, major currencies and a few other markets like Copper.  Even crude did very little (relatively speaking)

Copper (HG) Extends Breakout - Trading Coach - Learn To Tradea

So, What Now For The Broader S&P (And Other Indexes?)

No matter what kind of trading you do, its time to switch back to a long bias. ¬†Tuesday will likely bring a lot of flushes but they should be buying opportunities. ¬†Here are three specific trade ideas to look out for…

ES Buy At Market - Trade Idea #1 - Trading Coach - Learn To Trade

Trade Idea #1

Buy At The Market – This is the most aggressive option.

Entry: Buy at the market – ES, SPY, NQ.  NQ is the strongest market but ES is the broadest.

Exit:  Exit 50% of your position when the ES gets above 2140 (Close to the upper end of the triangle).  Pull stop to breakeven and hold the rest for an upside breakout.

Protective Stop:  Exit your position upon a CLOSE below the lower triangle trend-line (Black line in our first chart.)

ES Wait For Red Swing - Trade Idea #2 - Trading Coach - Learn To Trade

Trade Idea #2

Wait for a pullback on the hourly charts.  There are two ways to play this pullback…

Entry #1:  Wait for the 60 min or 120 min chart to show a red swing.  Enter at the market.

Entry #2:  Wait for the 60 min or 120 min chart to show a red swing . Enter when the swing changes to green again.

Exit:  Exit 50% of your position when the ES gets above 2140 (Close to the upper end of the triangle).  Pull stop to breakeven and hold the rest for an upside breakout.

Protective Stop:  Exit your position upon a CLOSE below the lower triangle trend-line (Black line in our first chart.)

 

ES Wait For OSC Pullback - Trading Coach - Learn To Trade

Trade Idea #3

Tomorrow (Tuesday Nov 8th) will most likely have a slight bearish bias as market participants wait to see the outcome of the election.

Entry:  Wait for your favorite shorter term oscillator on a 60 min chart to become oversold and enter when it turns back up.

Exit:  Exit 50% of your position when the ES gets above 2140 (Close to the upper end of the triangle).  Pull stop to breakeven and hold the rest for an upside breakout.

Protective Stop:  Exit your position upon a CLOSE below the lower triangle trend-line (Black line in our first chart.)

(Note: If you’d like to know more about the RED and GREEN swings you see on some of our charts, you can  sign up for a one hour coaching session.  You will be surprised what you can learn in 60 minutes!)

Which Trade Is Best?

As with yesterday’s NQ post, all the trades are overwhelmingly bullish trades. Basically, the idea is either to buy at the market or buy on a pullback but you’re buying no matter what.  You can also choose to express that bullish bias with options (buying calls, selling puts or put-spreads or selling VIX options).

ES Powering Up - Learn to trade with an experienced trading coach

ES Powering Up!

Photograph provided by shutterstock.com

Wrap Up

The ES has roared back to retrace a large portion of its losses from the last few days.  And it is well above its breakdown point on the hourly charts.  This, along with sentiment and aggregate fund cash positions, is very bullish for the overall market.  We presented three bullish trade ideas above – one aggressive and two conservative. We hope that you’re able to use these ideas to create trades that suit your unique trading style!

PS: don’t forget – if you have questions about the techniques used in this article, a simple 1 hour technical analysis coaching session can get all your questions answered!

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