Perfect Bear Flag Example Intraday SPY Jan 29

Jan 29, 2010: 6:43 PM CST

I always enjoy highlighting good educational examples that occurred during a particular trading day – if anything to archive it – and today gave us a great example of trading a Bear Flag structure intraday… actually the whole day!

Let’s take a look at the 5-min and 1-min intraday SPY chart (identical on the @ES futures) chart for a fun lesson on flags.

What I’m showing is the 20 EMA (green), 50 EMA (blue), standard Bollinger Bands, and the NYSE TICK (lower panel).

Price formed a relentless sell-off into 11:00am CST, formed a quick rally/retracement into resistance (50 EMA and Upper Bollinger Band) and then collapsed in a “Measured Move” bear flag formation down to the expected target.

The new intraday TICK lows (along with new price lows) highlighted the odds for lower price lows yet to come, and the price rally into resistance served as an excellent spot to short in anticipation of an afternoon sell-off.

As price rallied into the expected resistance area, a negative TICK divergence formed, which further increased the odds of a move lower into the afternoon.

See the 1-min chart below to observe that price also rallied into the 38.2% Fibonacci Retracement – which aligned with the 50 EMA on the 5-min chart.

It’s really neat when you see these concepts come into alignment in real-time intraday, and it enhances the odds of putting on a successful trade.

Should price continue rising, the stop-loss point is also clearly defined:  the $109.00 level which is a confluence of “Round Number” resistance ($109 itself) and the 50% Fibonacci Retracement.

The target – should it be hit – is also clear from a flag – it’s the 100% Price Projection (the $107.30 level).

For a detailed lesson on how to project a target for flags, see my prior post:

How to Project a Measured Move of a Bull Flag.

Also, view my Educational Page on Bull and Bear Flags for more information.

For conservative-style traders, the entry is as soon as price firmly breaks beneath the lower (rising) trendline, while aggressive traders would execute (put on a trade) as soon as price rallies into resistance and perhaps forms a reversal candle for additional confirmation (such as a doji).

I explain this concept in more detail, along with other lessons on professional trading tactics and strategies every day for subscribers of my Idealized Trades Daily Reports.

In order to see these concepts come together in real time, it is important to see and understand as many examples as possible – and learn from experience and repeated examples of these concepts.

Take a moment to see what additional lessons you can learn from the trading activity of the day – so as to improve performance the next time similar confluences set-up in real time in the future.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

5 Comments

5 Responses to “Perfect Bear Flag Example Intraday SPY Jan 29”

  1. Dominick Says:

    Hey Corey, great post. I have been waiting for a recent 1 or 5 min. intraday post with a Tick example to compare to my trading software.

    And now for the inevitable question.

    I have only been observing the Tick for only a couple of weeks now and this is by no means a scientific study on my part but, I have noticed that price tends to reverse (more on the 1 min. chart) at or around the more extreme Tick highs/lows. Above + 1000 or below -1000. Add in a little divergence on the Tick and the 3/10 and it seems to be a decent signal. Yours Thought?

    Thanks again. Enjoy the weekend.

  2. Richard Grissom Says:

    Saw this real time today, used 5 min TICK to short Crude on pull backs on down trend.
    Thanks Corey it all came together today! Popped stops, Fib Extensions, and trend lines!!
    Used 5 min, 15 min, and 1 hour charts!! Thanks again!

  3. ibiza2000 Says:

    Nice post. I caught the bear flag in real-time. But unfortunately I took profits before it made the target! I still have problems staying clear-headed while trading, and as it hit the earlier low and made a weak bounce I started thinking double bottom, momentum divergence, tick divergence and got out. Dammit!!! 🙂 At least I didn't go long and give back what profit I did have LOL. I tell ya, this stuff sure ain't easy.

  4. philzuco Says:

    I've got another one for you on the daily charts. Punch up URE (Ultra Real Estate ETF). Ready, locked and loaded for short-selling on Monday. It doesn't get more classical than that. I urge you to post that one on the site Corey.

    Cheers,

    Phil

  5. philzuco Says:

    I've got another one for you on the daily charts. Punch up URE (Ultra Real Estate ETF). Ready, locked and loaded for short-selling on Monday. It doesn't get more classical than that. I urge you to post that one on the site Corey.

    Cheers,

    Phil