The Catalyst and Targets for a Bullish Rally Jan 8

Jan 8, 2016: 3:35 PM CST

Are stocks set to bounce (rally) after multiple days of selling? Divergences at support say YES!

While nothing is ever guaranteed, let’s set the stage for what catalysts may trigger a bullish reaction higher (which you can trade) and what targets to play for should it occur.

We’ll start with the S&P 500 intraday chart (we chart the @ES later):

Take it one step at a time – we’re seeing the S&P 500 Index intraday (15-min) from December’s peak through what became January’s collapse.

I drew a Fibonacci Retracement Grid to help us determine a possible upside target should a rally develop.

Otherwise we’re looking at the 3/10 Momentum Oscillator (with positive divergences) and the NYSE TICK (also highlighting divergences).

You can learn more about positive and negative divergences via our lesson series.

Positive divergences often occur at reversal (inflection) points in price, as I highlighted on December 29th above.

We’re seeing price interact with the 1,935 and 1,930 level as positive divergences develop.

IF price stabilizes and rallies up away from the 1,935 level, it could result in an upward catalyst play toward 1,960 then 1,990 again.

We’d want to trade bullishly WHEN price is above 1,940.

However, nothing is guaranteed – we only trade probabilities – so we would continue short-selling the market in collapse mode (as strange as that feels) if instead the alternate thesis triggers with a breakdown under 1,935 and 1,930.

If so, 1,900 is a simple target to short-sell.  Ultimately, if buyers can’t rally the market off support with divergences, we’re likely to see another “collapse” swing straight down as sellers dominate (that would be an alternate thesis trade plan:  the Failure outcome).

Here’s one more chart for reference, this time using the tradable @ES Futures:

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Stay safe in this environment.

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Corey Rosenbloom, CMT
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1 Comment

One Response to “The Catalyst and Targets for a Bullish Rally Jan 8”

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