Intraday Elliott and Normal Chart Opportunities in the SPY July 7

Jul 7, 2009: 7:03 PM CST

Today’s price action held a lot of lessons for apt traders – let’s take a look at the SPY (US Market proxy) and the intraday chart to see what quick lessons we can learn from today’s price action – technically a Trend Day Down.

SPY 5-min normal structure:

Hitting the highlights, we see how the 3/10 Momentum oscillator – in terms of new momentum lows and divergences – can help us confirm or set-up trades, particularly into EMA overhead resistance on a day that shaped up to be a Trend Day … not from the open but towards the middle section of the day.

The ‘best’ trade of the day in my opinion came at the 11:00am pullback two-dojis off the 10:00am New Momentum Low – the risk (stop) was close and the trade offered a good probability of making a new low – which it did.

We formed another new momentum and price low at 11:45 which set-up another quick short trade that made a new price low on a positive Momentum and TICK (not shown) divergence – TICK divergences carry more weight than momentum divergences.

Price formed a larger than expected retracement off these levels but formed additional dojis just above the 50 EMA (I would have preferred price to have stayed beneath the 50 EMA!) and then we plunged to new lows particularly when price broke the 12:30pm lows at $88.70.  A flag formed into the close.

I save the bulk of the analysis and set-ups for subscribers to the new Idealized Trades service which is now available, and also provides levels/structure to watch for the upcoming day (how today’s structure carries forward).

Let’s take a quick look – for those so inclined – at today’s dual-fractal Elliott Wave pattern.

SPY 5-min ‘enhanced’ Elliott structure:

In the report, I teach how to recognize and confirm possible wave counts – particularly with regard to new momentum/price lows and third waves (look closely at the labeled 3rd waves) and then divergences (reversals) up off final 5th waves.

Today’s structure provided an excellent example of divergences and Elliott Wave as an overlaying tool to help assess price moves and possible opportunities.  Review my prior post on “Best Trades to Take in the Elliott Wave Structure” as well as my free resources on Elliott Wave.

Please check out the new premium service – today’s report goes into six PDF pages of highlighting the TICK, daily S&P 500, 15-min SPY, and of course the 5 and 1 min SPY for lessons, clues for the future, and insights to drill these concepts home and help you recognize these patterns quicker in real time and profit from them – armed with new deep level knowledge on expert trading strategies.

Corey Rosenbloom, CMT Continue Reading…


Weekly and Daily Conflicting Opportunites in IBM

Jul 7, 2009: 11:45 AM CST

We’re seeing a very similar situation in IBM’s Weekly and Daily charts that I highlighted in a prior post on RIMM (RIMM:  Bullish or Bearish?  Depends on Your Timeframe).

If you look in isolation at IBM’s Daily chart, you might want to get aggressively short right here right now thanks to a breakdown of support; however, if you look only at IBM’s weekly chart, you might want to get aggressively bullish thanks to confluence support.  What does a trader do?  Let’s take a look.

First, let’s start with IBM’s Weekly Chart:

I actually cheated and added extra analysis for you to give a little more insight.

The main idea (ignoring the Elliott notation for a moment) is that the $100 price level offers three levels of confluence support – first, from the convergence (and bullish crossover) of the 20 and 50 week EMAs.

Next, we see that a truncated Fibonacci grid from the 2008 highs (can you believe IBM peaked in mid-2008 instead of late 2007?) to the November closing lows yields the 50% retracement at $100.81.

Taken together, when a Fibonacci node intersects an EMA confluence, that yields powerful support.

Looking at these two facts, one might want to get aggressively long and place a stop conservatively around $98 or aggressively beneath $95.

With this bullish scenario in mind (again, ignoring the “bear flag” and Elliott Wave – we’ll come back to that), let’s look to see what the Daily chart reveals.

Next, to the Daily Chart of IBM:

Again, using basic technicals, we see a lengthy up-swing that may be ending.  Price formed a ’shooting star’ bearish reversal candle at $110 and has fallen to the $100 level, breaking down beneath the rising 20 and 50 day EMA, along with an up-sloping trendline connecting multiple lows.

There also was a negative momentum divergence that has peaked at the March momentum high – that’s a non-confirmation of higher prices.

Using this in isolation, a trader might get aggressively short and place a stop above $105 and play perhaps for a target of $84.

With simple technicals showing the weekly chart at confluence support, and also showing the daily chart breaking down from confluence support – what is a trader to do?!

Additional/Advanced Technicals

My main point in this post is to alert you that – in most cases – simple chart-reading will be effective.  However, do not look at a single chart in isolation – always look at a higher (or sometimes lower) timeframe using those same ’simple’ technicals to see what the picture really is and if you’re seeing a similar “story.”

In this case, you’re not, so if you’re a newer trader, it’s probably better to wait for a breakdown of confluence support on the Weekly Chart before getting short – after all, those confluence levels could hold as support as anticipated.

You can always move on to other stocks to trade that have clearer patterns to you.

As a bonus for more advanced readers, we see the Elliott Wave structure (possible count) hinting that a Wave C decline might be in the cards, as well as a potential to breakdown from a possible massive bear flag (link: basics of Flag Patterns).  Traders unfamiliar with chart patterns or Elliott Wave (and no, you don’t have to know everything to trade successfully) would be unaware of these additional insights.

Stick with what you know, know your risk on a trade, and study multiple timeframes for structure.

Corey Rosenbloom, CMT
Afraid to

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Three Push and TICK Divergence Form Intraday Low July 6

Jul 7, 2009: 1:15 AM CST

In yet another example of how an intraday low in the SPY (and other major market ETFs) are formed either on distinct momentum or TICK divergences (or both!), the intraday price action of SPY gives us yet another crystal clear example of this trading opportunity.  Let’s learn from it.

SPY 1-min (half-day) July 6, 2009:

We’re seeing the SPY 1-min structure from 9:30 EST to around 1:00pm (compressed).  I’ve also overlaid the TICK (stocks making an up-tick at the moment minus those making a down-tick on the NYSE).

Price formed the morning high on a three-push reversal pattern (check out our new free Education Center which is a growing and developing resource) which was confirmed with a negative momentum divergence (not shown).

We then moved to new TICK and price lows just after 10:30, but look closely at the TICK as price pushed to new lows on the trading day.  As price made three mini-pushes to new lows, the TICK actually made higher lows – that was a glaring non-confirmation which hinted odds favored a reversal off these levels.

That meant you could have put in a long (buy) trade here and played with a tight stop to play for a possible reversal… if you were watching the TICK along with price.

We did get the reversal, and – like many examples I have highlighted – intraday highs and lows often form on distinct TICK or Momentum (or breadth) divergences.

I explained this and many other trading opportunities and ‘lessons’ from the price structure in my new “Idealized Trades” report service which is both an educational “learn by seeing multiple examples” resource but also takes the structure of the day and highlights key price levels and opportunities to watch for the next day’s trading session.  Check out the information on this new and unique service at the new Premium section of Afraid to Trade.

The more times you see these concepts and simple patterns ‘play out,’ the better you’ll be to act upon these opportunities and profit from these concepts in real time as they occur in the heat of battle – that’s what it’s all about!

Corey Rosenbloom, CMT

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Has a Top Formed in Crude Oil? Monthly and Weekly View

Jul 6, 2009: 1:38 AM CST

The following charts are taken from my new weekly “Intermarket Technical Report,” which goes into greater detail in discussing the current and potential future price structure for crude oil.  For now, let’s take a look at the Monthly and Weekly timeframe charts to see EMA and Fibonacci confluence resistance overhead.

Crude Oil Monthly Structure

Taking a quick look, we see a dominant Elliott Wave count, which places us either at the final stages of Corrective Wave B up, or the beginning stages possibly of Wave C down which could eventually target the $35 lows over the next few months, particularly if the S&P 500 falls to test its lows.

I wanted to highlight the confluence levels (click for larger chart) about the $70 to $75 level.

First, we see the 50 week EMA at $70.14 and the 20 week EMA at $72.11.  With the scale so large, this $2.00 zone would be considered an EMA confluence zone to watch – we’ll split the difference and call $71.00 as significant resistance.

Just above that is the 38.2% Fibonacci retracement from the closing high to the recent 2009 lows.  This retracement price comes in at $75.50.

Let’s see what the weekly structure shows.

Crude Oil Weekly Structure

We now see the 200 week SMA residing at $74.80, which is serving as well as resistance.

Price is currently supporting on the 50 week EMA at $66.88, so watch closely if this level is broken – a break of $68.00 would almost certainly set up a test of the rising 20 week EMA at $61.00.

Any bearish view would be negated with a close above $75 and especially $80, but for now, there appears to be more confluence overhead resistance than support, so let’s watch the downside risk for now.

For more analysis of Crude Oil (this is just a sample) as well as a multi-timeframe view (Monthly, Weekly, and Daily charts) of the 10-Year Notes, S&P 500, Gold, Crude Oil, and US Dollar Index, please check out my new subscription weekly service “Weekly Intermarket Technical Analysis” (full information and two samples are provided with the link).

I’ve been doing this analysis privately and for mentorship clients, and I’ve made it more formal/informative and am proud to offer it as a new and unique analysis of multi-timeframe structures for key levels to watch and opportunities to trade both for short-term and position traders of key markets.

Corey Rosenbloom, CMT

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Monthly Elliott and Fibonacci Analysis of India’s Nifty July 4

Jul 4, 2009: 12:12 PM CST

Per multiple reader request (thank you to all my followers in India!), I am updating my analysis on India’s “Nifty 50″ Index, beginning this week with the long-term 10-year Monthly Structure.

Let’s take a quick look at a possible large-scale Elliott Wave count and also a Fibonacci Confluence (three price levels) chart on the monthly timeframe – a key turning point may be ahead soon.

The market rallied sharply off the 2003 lows near 1,000 and peaked in January 2008 at a price high of 6,350 – an absolutely impressive rise to be sure.

Look closely and you can see an ‘arc’ rise (not drawn) off these lows as price went ‘parabolic’ in its last few months – a classic warning of a top being formed.

We see the Elliott Wave count (from 1 to 5) as the market rose 600% in value.  We now appear to be in a corrective phase, and perhaps are finishing the “B” (second) wave of a larger corrective move to retrace a larger portion of this price rise.

This count would assume that the final “C” Corrective wave down is on the horizon, which could take price back down to test the 2,500 level yet again in the months and perhaps next year to come.

We have already retraced 61.8% of the move from the 2003 lows to the 2008 highs, so perhaps the corrective phase has run its course – that would be the alternate scenario.

The “alternate” scenario would assume that instead of the 5-wave decline I have labeled as “A,” we instead had a complex corrective move down – perhaps in the order of ABC – X – ABC to end the correction, which places us squarely in Wave 1 now of a “new bull market” and expecting a corrective Wave 2 down (not to the lows – but perhaps to the 3,500 level) to begin.

I think it ‘counts better’ as a correction instead of a new bull market, but we need to be open to this possibility.

Either way, the “Next Likely Swing” appears to be a down one, whether it be the final Wave C or just a corrective Wave 2 – that is where I find Elliott Wave helpful – not in absolute forecasting, but in confluence counting in regards to the “next likely swing.”

Speaking of confluence, let’s take a look at a “Confluence Fibonacci Grid” using three price lows to begin our retracement to the closing high in January 2008.

Two of the 3 grids overlap about the 4,400 level, which you see is exactly where price is located now.

In fact, that is the only major overlapping confluence level we see using these grids on the chart.

This implies that price is at a “critical node” and could be unable to overcome this confluence level to the upside – in other words, it could serve as key resistance.

Last month also formed a “Spinning Top” candle, which is often seen and associated with key turning points in a market.

As a caveat, there’s no guarantee of any absolute prediction into the future, but for now, we have the following:

Possible Wave C (or Wave 2) down about to begin
Price at a critical Fibonacci Confluence Node around 4,400
A Spinning Top candle formed in June on the confluence node

A solid close above 4,800 and especially 5,000 would overrule these bearish omens, but until then, it might pay to be defensive on the long side at these levels.

(Note – for US readers, understanding that the Nifty is at confluence resistance ties into the thesis that the S&P 500 is forming a possible reversal pattern down (Monthly “sell signal” and also Daily Head and Shoulders with momentum/volume divergences) – and adds a layer of confirmation that both markets appear poised for corrections).

Corey Rosenbloom, CMT
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