Three Push and Cradle on SPY Intraday Apr 23

Apr 23, 2009: 11:39 PM CST

I wanted to highlight the Three Push Reversal Pattern which led to the Cradle Trade on today’s intraday SPY chart.  Let’s see these trade set-ups!

I’ve done something a little special for you in tonight’s post.  I get a lot of questions about my “3/10 Oscillator” I use so I wanted to show you how similar it is to a Rate of Change (or other Momentum) oscillator.  In this case, I’m pairing it up against a 5-period RoC Indicator which anyone can use on any charting platform.  It’s almost identical to the 3/10 MACD Oscillator.

That being said, price made three symmetrical swings (pushes) down to new lows beginning with yesterday’s close.  I call this the “Three Push” pattern and it almost always leads to a price reversal, or deeper than normal counterswing in price – it’s a powerful set-up that can lead to good gains with relatively low risk (the stop would go slightly beneath the third swing that you perceive).

In this case, the final ‘push’ (swing) formed a spinning top/doji reversal candle at the S1 (Support 1) Pivot Point (not shown).  It was also fulfilled the “Measuring Objective” of an “AB=CD” Measured Move (bear flag-like pattern), so we had different reasons for confluence support at that low of the day (the TICK also formed a slight positive divergence into that low).

I deemed that to be the most powerful trade set-up of the day, and it led to a push to new highs on the day.

The second point I wanted to highlight was the Cradle Trade which formed just after 2:00pm.  Price retraced slightly beyond the cradle, but this is why it’s often better to use wider (as opposed to tight) stops no matter how uncomfortable it might feel – don’t place your stop pennies beneath expected support.

Though it’s more an interesting observation than a possible trade set-up, price formed a broadening pattern (note the expanding trendlines that began off the 1:30pm highs into the close).  You don’t see that very often.

There were also Elliott wave insights on the day, but I wanted to focus here on the “Three Push” and “Cradle” Trade.  Keep looking for additional insights and try to internalize these patterns so you can recognize them as they form in real time!

Corey Rosenbloom, CMT
Afraid to Trade.com

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15 Comments

15 Responses to “Three Push and Cradle on SPY Intraday Apr 23”

  1. gawed Says:

    hey man, great stuff as usual.

    just a doubt about that craddle trade: i see price actually went below the lines so thinking about the usual tight stops that come with the setup the trade would have been stopped right? any way to know u had to have a looser stop loss for that trade or the only way was to take the stop and then be brave enough to reenter the trade when you see it crossing over the lines again?

  2. Jim Says:

    Hi Corey,

    I see three broadening triangles… This could be a market top forming.
    One starting at 1:30 on Apr. 23
    One starting at 10:30 on Apr. 22
    One starting on the close of Apr. 13 (daily)

  3. Leo Says:

    Hi Corey,
    I’ve recently come across your website and enjoy the output you produce very much.
    I was trying to replicate your MACD reading, which I can’t. I’ve tried the various combination for the long, short and trigger values using your 3,10,16 parameters but yet fail to replicate the graph. I would really appreciate it if you could explain how you set your parameters (or direct me to previous post where maybe this topic has been already covered.)

    many thanks,
    Leo

  4. Hardev Singh Says:

    Dear Sir,
    I agree with your point of view for 3 push followed by price reversal & that it has exhibited on the chart proved remarkably true but afte 1 PM negative diversion is visible on the MACD histogram even though not clear on the black line (3/10 OSC)or even 5 ROC for both upward price pushes on either side of the craddle after 1 PM may the cause for price making lower But More confusing is the phenomenon of price expansion towards the end that is not understood

  5. Hardev Singh Says:

    I tried to analyze the fibonacci ratios the 1st dip after 1:30 PM was 4th wave 38.2% retracement in 3rd wave & then around 2:45 PM another retracement that was 4th wave of the complete elliot wave that got completed with a last price push up

  6. Hardev Singh Says:

    Dear Sir,
    I was looking at the 6 month chart first huddle is 877.86 & then is 943.85 But a fall below 826 could be dangerous as ROC is showing negative diversion 3 counts & RSI showing 2 counts 3rd count can be with fall below 826 – other way around is the price is in rising regression channel a postive break out can change the whole scenario & achieve both heights mentioned above & turn bullish this morning price crossing above 861.78 has given signal of break out as the rally will become longer than fall when the price rise above 927.45 can be achieved as the distance from lower end to the top trend line of regression channel is 155.8 (828.68-672.88) should be the same from the bottom of last bottom within the channel when the break out happens that will happen since this morning MACD RSI & ROC all have become positive & risen above the previous day & high hence as per my calculation 991.5 is achievable

  7. Hardev Singh Says:

    I was examining the chart to view the phenomenon from 6th Jan 2009 onwards when the last top was made at 943.85 as the reversal of trend is possible only when the rally start getting bigger than fall
    Date price 3/10 MACD RSI 14 ROC 5
    Jan 6 943.85 22.32 58.71 58.03 (59.0 on 2 Jan)
    Mar 26 832.98 27.80 61.91 64,32 (80.02on13mar)
    After 26 Mar & 21 Apr only the price made lower which otherwise progressing in rising regression channel where as MACD & ROC given negative diversion by forming lower bottom & break below but only RSI did not complete the process as it did not break below the lower bottom
    it might have been possible if the price broke below 826
    In the view of changes on 23rd Apr as mentioned above message The present rising regression channel is likely to contnue
    25,50 & 100 EMA are rising (100 EMA ha started on 23 rd Apr need little more time to complete 2-3 ticks up)25 have crossed over 50 & all these are converging to give a powerfull break out (sismilar phenoneon i was obeserving on NIFTY50 when it crossed above 2848 & 3148 even though not with similarity with this in negative diversion)

    For negative beakdown RSI need to signal with price fall confirmation & for positive break out RSI & ROC have to cross above the 17 Apr & 15 Apr values rspectively & MACD above 17 Apr value

  8. Dominick Says:

    Hello Corey, would this also be considered a rounded reversal or is it not symetrical enough?

  9. Corey Rosenbloom Says:

    Gawed,

    One thing to remember is that – particularly in this environment of volatility – we need to give trades a little room to breathe, so we can’t place our stops so tight to these confluence moving averages.

    I prefer tight stops personally, but I’ve now adopted (forced myself) a strategy to buy if I get stopped out and price rises back above my entry. I make myself buy back in for the trade. That seems to work but it’s of course better not to have my stop so close where I have to get in that situation.

  10. Corey Rosenbloom Says:

    Jim,

    Good analysis! I didn’t see those.

    I’m watching the trendline from the March 9 lows to Friday’s highs. It was broken on Monday and has now served twice as resistance. Also the wedge on the 60min chart.

    There’s so many bearish patterns but bulls don’t seem to care.

  11. Corey Rosenbloom Says:

    Leo,

    My post here might be helpful:

    http://blog.afraidtotrade.com/how-do-i-create-the-310-oscillator/

    If for whatever reason your software won’t let you replicate it, a 5-period Rate of Change (ROC) works just as well.

    It won’t have the trendline in the middle which is important, but it will function like a momentum oscillator, particularly for divergences.

  12. Corey Rosenbloom Says:

    Hardev,

    I hear you – it almost felt like price was swinging out of control into the close. It broke the Cradle convergence and did form a flat-line divergence, but price expanded in both directions into the close.

    At times like that, our money management and stops protect us – but it’s so frustrating, I know.

  13. Corey Rosenbloom Says:

    Hardev,

    In reference to Fibonacci and Elliott, it could have been an Expanding Triangle of sorts.

    I also looked to see if it might have been a Wolfe Wave but I couldn’t piece the waves. If anyone uses Wolfe Waves, please comment here on that.

  14. Corey Rosenbloom Says:

    Hardev,

    If we break out to the upside of this wedge, I’d almost guarantee we’d see 966 if not 1,000 on the S&P. I’m just expecting some sort of retracement down to give a better entry – it’s so rare to see price so strong with such minimal retracements.

    One can draw either a trend channel or converging trendlines to form a wedge. A push above 870 would likely take us to test the 950 highs and then a battle would ensue there.

  15. Corey Rosenbloom Says:

    Dominick,

    Good call! That’s why I like posting these charts so readers can point out things I missed. I was focused on teaching the 3-push pattern.

    Yes, it can be classified as a “Rounded Reversal”.

    Excellent observation!