The Anatomy of August 27 SPY Rounded Reversal

Aug 27, 2009: 12:52 PM CST

Though the day’s not up yet, I wanted to share a quick take on today’s “Rounded Reversal” pattern, as it serves as a great educational example.

SPY 1-min chart:

(Click for full-size image)

Price began a downward impulse off the morning’s open, which was then met by a positive momentum and tiny TICK divergence at 9:00 CST/10:00 EST.  This served as ‘non-confirmations’ of the lows and hinted that a retracement back to higher EMAs was likely – giving a quick ’scalp’ trade long into the red arrow resistance of the 50 EMA.

Price then was expected to form a new low in “Trend Day” fashion, though buyers stepped up and bounced price upwards off support.

What I define as the “Line in the Sand” is the 50 EMA, because – if broken – it often negates a “Trend Day” bias and flips to favor a potential “Rounded Reversal” type of day, particularly if we’re seeing strength in the TICK or breadth… or an ‘arc’ formation in price itself.

We then saw two TICK and Momentum highs (labeled) along with relative price highs above the 50 EMA, which furthered our confience that a “Rounded Reversal” became the dominant structure and we had to abandon any bearish pretenses.

It was then easier to ’scalp’ or trade long (buy) with the anticipation price could make a full run to challenge the morning high.

I’ll describe this pattern, along with the full day, in tonight’s “Idealized Trades” report, which is a daily educational reference on how to recognize structure, intraday trading opportunities, and also includes “teaching moments” (perhaps on intraday Fibonacci, Elliott Wave fractals, etc).  Please visit the Premium Site for more information and membership information.

Corey Rosenbloom, CMT

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  • Bhupehs

    Hi Corey,

    DEll Chart shows a break out from Upper band of bollinger.

    Can you please post a chart and analysis on Dell INC. Stock.


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