Rounded Reversal, Dual Divergence, and Trendline Breaks SPY Intraday Mar 25

Wshew!  The day’s not yet over, and we’ve already had a ‘dual negative divergence,’ Rounded Reversal, trendline fake-out, and a potential ascending triangle forming.

Let’s take a quick look at these set-ups and how they played out, along with where we are right now.

(Click for Full-Size Image)

Without getting too detailed, notice that the intraday swing high was met with a ‘dual’ divergence in both the 3/10 Oscillator and the NYSE TICK – dual divergences don’t happen all that often, and when they do, they signal that an intraday reversal is favored.

This also is a semi-example of the Three-Push Reversal Pattern I have described in prior posts and webinars.

The trigger is often a break under a rising trendline after the dual divergence forms, which occurred at 12:30 CST just shy of the $118.00 SPY level.

True to the sell-signal that this gives us, price plunged for the rest of the session, forming a sort of “Rounded Reversal” pattern to complete (or ‘mirror’) the morning rally.

Although I didn’t label it, a “Cradle” Trade set-up at 1:00 CST as price rallied back into the ‘bearish crossover’ of the 20 and 50 EMA and a doji (reversal candle) formed at the $117.65 level.

Those were just some of the trade set-ups that were possible, and I’ll be describing all of them as usual in tonight’s part-educational, part forecasting “Idealized Trades” Report for subscribers.

Where are we now?

Again, taking the “Pure Price” approach I mentioned in this morning’s update, there are key short-term trendlines to watch:

The “ascending triangle” (which should be interpreted neither as bullish or bearish, but as a consolidation pattern) lower trendline intersects the $117.00 key support level.

A break under this level would trigger another sell signal (update – just before the close, this occurred) and break of support which could continue the reversal that formed at the $118.00 level.

If this were the case, we would interpret the morning spike as a “Bull Trap” that lured in the bulls and then price fell shortly after.

Otherwise, watch these short-term trendlines (mainly for intraday traders).

Always take the time to learn lessons from each day’s activity so you can continue growing your knowledge.

Corey Rosenbloom, CMT
Afraid to Trade.com

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