SPY Intraday Doji into Fibonacci with Divergence Example

Nov 30, 2009: 2:42 PM CST

Friday’s intraday trading action in the SPY gave us a great opportunity to see an example of at least three non-correlated trading strategies/methods coming into ‘confluence’ to create a low-risk, high probability trade set-up.  Let’ see it in action!


(Click for full-size)

As expected from Thursday’s post, the market gapped down on Friday morning and then suddenly began to recover its losses over the Thanksgiving holiday.

It appeared ‘corrective’ in that price moved within a rising trend channel similar to a ‘flag’ (but much more extended), and then price reached a “Decision Moment” or “Technical Decision Node” at the 61.8% Fibonacci Retracement of Wednesday’s close to Friday’s open.

This came in at the $110.25 price level just after 10:00am CST when price also formed a negative momentum divergence (external divergence) and then a ‘tiny’ TICK divergence on the doji that formed at this level.

Until then, the TICK had been confirming price with new TICK highs forming on subsequent new price highs – that changed as price formed an ‘indecision’ candle that spiked to a new intraday high at the 61.8% Fibonacci retracement.

All of this painted a picture of higher odds favoring a downside move than further upside, or at least giving us a short-term window of opportunity to place a tight stop above the high of the 1-min doji, enter on a close beneath the low of the doji, and then play for retests of prior lows or for a potential trend reversal (depending on how aggressive we are as traders).

After I captured this chart, price ended on a positive momentum divergence that preceded a slight upward rally, though price closed the session lower at the $109.50 level.

This is a good example of how a Fibonacci Retracement, ‘dual’ negative divergence (non-confirmation), and doji candle contributed to a short-term trade with low risk and high probability of success.

The more times we see examples like this, the more are likely to see them and then trade them in real time as they form.  That’s the basis behind the “Idealized Trades” daily summary subscription service.

Corey Rosenbloom, CMT
Afraid to Trade.com

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

3 Comments

3 Responses to “SPY Intraday Doji into Fibonacci with Divergence Example”

  1. meques Says:

    Entered short at the session high, but not cause of fibo resistance level or doji.
    On the minute chart, at least ES, SP500 futures, in the AM trading have posted three push divergence.
    Buyers attempt to create upside trend day was rushed down by mixed mkt performance in the 1st 20 minutes. TICK sentiment was also irrelevant with SP500 performance. From the mkt open to its highest todays morning point we did have lots ticks <-600 as well as lot ticks >+600. SP was at near +0.4% in the AM trading but internals were not appropriate, at least ADD that moment, highest morning point, posted only +300. With sharp reversal from morning session high and easy VWAP breakout to the downside, it was nice game for possible 10pts (ES) profit.

  2. needsee Says:

    Needsee is considered as a global e-commerce trade platform for global suppliers to find more buyers, provide buyers around the globe with the best choice; is a provision of services for buyers and sellers across all platforms.
    With the development of world economy, more and more businesses men have chosen the network, especially for overseas customers to find a suitable platform for their own e-commerce is undoubtedly the best and most effective way.

  3. needsee Says:

    Needsee is considered as a global e-commerce trade platform for global suppliers to find more buyers, provide buyers around the globe with the best choice; is a provision of services for buyers and sellers across all platforms.
    With the development of world economy, more and more businesses men have chosen the network, especially for overseas customers to find a suitable platform for their own e-commerce is undoubtedly the best and most effective way.