SP500 Support Level Planning into 1770

Jan 27, 2014: 1:44 PM CST

As traders, we often look to simple support levels to form the core of short-term trading strategies.

For example, we may look to play bullishly for a bounce off a key level, or else trigger a short-sale position on a breakdown under the same level.  It’s a way to view price without bias, awaiting a reaction into a critical level.

We have another short-term support level challenge – and opportunity – happening right now into S&P 500 index level 1,700 which we can see clearly on the hourly (intraday) chart below:

S&P 500 SP500 SPX SP500 Hourly Chart Intraday Day Trading Strategy Levels

The 1,770 index level is  a “Polarity” level, which means that 1,7700 has served both as resistance (early November) and support (mid-December).

It doesn’t mean that price is required to bounce again up off this level, but it does provide a clear “make or break” pivot to use for planning buy or sell strategies with the other indicators or trade entry methods that you use.

With the exception of a quick “Bear Trap” – an initial or quick break under 1,770 that results in an instant upward move back above 1,770 (reference December 18th’s “Fed Day” example) – we would generally look to trade bearishly under 1,770 or aggressively bullish on any upward impulse from 1,770.

When planning, keep in mind that Wednesday is another “Fed Day” where additional volatile action could quickly develop.

We can see the broader structure as seen on the Daily Chart:

S&P 500 SPX SP500 Support Level Planning Technical Analysis Daily Chart

I drew the “Polarity Level” (1,770) with a blue horizontal trendline.

We’ll note the prevailing uptrend in price that has been threatened with a break and close under the 50 day EMA.

To play devil’s advocate, notice also the late August and mid-October instances where a similar thing occurred (break and close under the 50 day EMA) only to see buyers step in aggressively to trigger a ‘short-squeeze’ event which continued the uptrend in motion.

In conjunction with other strategies you’re using, pay close attention to what happens this week – or today – with respect to the critical “Make or Break” 1,770 Price Polarity level.

For reference, see my prior two updates regarding key support levels in the S&P 500 (and the outcomes):

Respecting the Range While Awaiting a Breakout (which occurred the next day)

Charting the S&P 500 Range Breakdown

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Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning parameters as we watch a “hold and bounce” or “break and retrace” scenario play out in the near future.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

4 Comments

4 Responses to “SP500 Support Level Planning into 1770”

  1. Updating the Daily Target Levels for Dow NASDAQ and SP500 after Breakdown | Afraid to Trade.com Blog Says:

    […] NASDAQ and SP500 after Breakdown Feb 3, 2014: 1:11 PM CST With the S&P 500 breaking under the critical “make or break” support level into 1,770, let’s update the chart to call our attention to the new downside support targets not just in […]

  2. Updating the Daily Target Levels for Dow NASDAQ and SP500 Says:

    […] you’ve not done so already, be sure to read my earlier update on the importance of 1,770 and the level planning respective to this […]

  3. The Surprisingly Simple Planning Level for the SP500 | Afraid to Trade.com Blog Says:

    […] “S&P 500 Level Planning into 1,770” (Jan 27) […]

  4. The Surprisingly Simple Planning Level for the SP500 Says:

    […] “S&P 500 Level Planning into 1,770” (Jan 27) […]