Plotting the Current Range and Planning the Future SP500 Breakout

Jan 26, 2015: 3:16 PM CST

What goes up must come down, and in the market, what goes sideways must break out.

We’re currently charting a wide range pattern but soon, we’ll need to shift gears for a breakout event, so let’s plan both of these events and be ready to jump in when the market tells us it’s safe to do so.

Let’s first start with the left side of the chart (the past) and move forward.

I highlighted each sideways move or consolidation in the market.

Remember, the market consolidates (forms a sideways range) before a breakout, and of course after a breakout impulse has run its course.

While you can trade the ping-pong range action inside the consolidation – “Range Fade” tactics – many traders prefer to wait to join into the breakout to capture more efficient profits.

Closely study each prior small and large consolidation and the eventual breakout from the range.  Note the multi-day movement in the direction of the breakout each time.

My sense is that the market is forming a similar Diamond or wide-range pattern to what we saw around April 2014.

This means that we probably have a few more “swings” or ping-pong price action within the consolidating range ahead of a future breakout.

This would make 2,050 the short-term (current) pivot to watch for a swing down from resistance… or alternate breakout from the range.

Look to target the 2,000 level again.

Incorporate these levels and this repeating pattern into your analysis and trades and be ready for the future breakout.

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Corey Rosenbloom, CMT
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9 Comments

9 Responses to “Plotting the Current Range and Planning the Future SP500 Breakout”

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