Rounded Reversal Forming Again on Intraday SP500 June 1

Jun 1, 2010: 2:24 PM CST

Here we go again – from the looks of it, price is forming another classic Rounded Reversal Pattern complete with negative divergences, which would forecast a retest of 1,040.

Let’s see what levels to watch that would confirm or disconfirm that view from a chart perspective:


(Click for full-size image)

Quick commentary shows us the classic “arc” pattern formation – Rounded Reversal – that has developed on the 15-min chart – red line.

The BLUE line is the rising trendline that price broke today to the downside – that’s the aggressive (first) point to get short for a potential short-term reversal or short-sale trade.

The GREEN horizontal line represents the “Line in the Sand” or the official trigger point to get short to target 1,070 minimum or 1,040 (more likely) if the S&P 500 breaks solidly beneath that level – it stands at 1,080 (easy to remember).

The price that would DISCONFIRM or make this a failed pattern is a break back above the recent high at 1,100 (which would likely trigger a quick round of “popped stops” from those who are short).

Notice the distinct negative momentum (blue oscillator) divergence that occurred, along with the negative TICK high divergence, as highlighted with the yellow vertical rectangle.  That’s a classic hallmark of a market in transition/reversal.

For past posts showing prior examples of Rounded Reversal patterns, see:

“Rounded Reversal and Sell-off in Intraday Crude Oil – May 4”

“April 6th Update on the Rounded Arc in the NASDAQ”

“Intraday Rounded Reversal Arc into Support in Goldman Sachs GS”

Lesson:  “Rounded Reversal, Dual Divergence, and Trendline Break – SPY March 25

And as always, to keep up with my daily market commentary/analysis/education posts, check out my Intraday “Idealized Trades” Commentary service.

Rounded Reversals are becoming one of my favorite price patterns – take time to learn this concept if you aren’t sure of how to trade it when the pattern repeats.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

3 Comments

3 Responses to “Rounded Reversal Forming Again on Intraday SP500 June 1”

  1. colodude Says:

    I happened to catch a good 1% move of SPX at about the same time you made this post. I have NO confidence how tomorrow AM (or tonight, for that matter) will behave, based on the news cycle's impact on last night's ES contracts. There were just no forcing functions all day until the end.

    Having said that, tomorrow should touch 1066-ish, and if there is some bulk to the trading, THEN I'd expect a push-down to the 1040-ish values. Gotta wait for that volume, and the news that could push either way won't arrive until Thur. Boy, this is a tough stretch!

  2. SA Says:

    Thanks for the timely post. My position reversal paid off well.

  3. theyenguy Says:

    Nice chart … I sure wish I had TradeStation software … look at that hanging man candlestick and bearish engulfing candlestick back on May 25, 2010; that was a “golden sign” to go short the S&P; that was a take it to the bank signal.

    The rounded reversal is also known as a broadening top pattern — a great pattern to enter shorts against.

    Perhaps one might like today's article … Stocks Fall As Investors Turn To Gold For Safety
    http://theyenguy.wordpress.com/2010/06/01/stock