Intraday Insights

Feb 28, 2008: 5:35 PM CST

Today was in interesting day in terms of intraday analysis and trading. Let’s take a look at what happened today!

First, the idealized trades in the SPY on the 5-minute chart:

While the chart may seem garbled, let’s take it step by step.

First, notice the gap fade trade that resulted in a bear flag. Traders should have entered early to play for a full gap-fade, but realized profits when the market began to roll-over at key moving average resistance (first arrow).

Savvy traders realized the bear flag pattern and entered short aggressively at this zone to play for a ‘measured move’ target.

Exiting at the full price target, traders either could have bought for a reversal trade, but more likely should have stayed out, expecting market consolidation following a large volatility price move.

The multi-swing positive momentum divergence that developed hinted at higher prices yet to come, and the 1:00pm triangle led to a volatility breakout (long) trade.

A momentum divergence formed right at 3:00pm, which hinted at lower prices, but did not alert to a trend change. Divergences usually give targets that allow us to play for the 20 period moving average only.

Price broke these averages and found resistance at these levels into the close, and the market closed near its lows, which confirms the inherent bearishness in the general market.

Moving away from the intraday charts, let’s look at the daily chart:

I have drawn two potential triangle consolidation patterns on this chart.

First, let’s note that the market (and the Dow Jones Index pattern looks very similar) has found key resistance at a major horizontal line that has served both as resistance and support in the past.

The price is trapped between two trendlines (red) that are holding the market between these zones, and a breakout seems imminent, but may not come this week.

A second consolidation triangle (purple) has broken out to the upside and is experiencing a ‘throw-back’ test, which is actually a buy signal, but the target is so small that it is better to view price within the context of the overall red-line ascending triangle consolidation.

Watch out for the potential of a large volatility move either to the upside or the downside within the next few trading days.

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One Response to “Intraday Insights”

  1. 10kthrownaway » Blog Archive » The 8:01 Report Says:

    […] good article offering intraday insights on trading the SPY Another great trader/blogger Chris Perruna has been interviewed by Tim Phil […]