Two Flags and Two Cradles on April 8 SPY Intraday

Apr 8, 2009: 11:42 PM CST

On each intraday post, I try to highlight a key trade set-up or structural point that occurred during the day.  Today, I wanted to highlight the Two Flags – one bull and one bear – as well as the Two Cradle Trades that set-up during the day.  Let’s see them in action!

The day began with a small opening gap which was quickly faded (filled).  Though price tried to find support on the confluence movnig averages, alas the Gap Fade overpowered the structure.  But let’s focus on the Two Cradle Trades and Two Flag trades for our lesson of the day.

Generally, “Cradle Trades” are less reliable in a trading range (because moving averages lose their value with multiple price-bar overlap), though a decent EMA crossover occurred at 10:30 CST and price pulled back just after the Cradle formed (making it a late support trade).  The goal is to buy as close to the moving average confluence as you can and then place a stop just beneath the confluence EMAs.

As price completed a momentum push into the 11:00am highs, a clean and stead retracement (roughly 45 degrees) formed back into confluence EMA support which set-up the classic and powerful “Bull Flag” trade (which also used a stop beneath the 50 EMA).  What’s powerful about flags is that they give you a clean stop-loss area as well as an exact “measured move” target.  We hit that target quickly at noon, and a powerful Gravestone Doji (reversal candle) formed on the intraday highs.

Price turned right around and broke EMA support to form a new momentum low (not shown) and then formed another clean retracement back into support… this time directly into the Cradle, creating a marvelously powerful confluence of two specific trades:  The Bear Flag and the Cradle Trade. Look closely to see that these two trades triggered at the exact same price.

As anticipated, price formed a powerful inflection down into the prior support level which happened to be yesterday’s close as well as the Price Target for the Measured Move of the Bear Flag.  Price formed a doji (spinning top, actually) at these levels and then rocketed off, creating another 5-Wave Elliott Pattern (on the 1-minute chart… see my post on this from April 7th’s action on the exact same pattern).

That’s exactly why I do these intraday posts for you – these patterns repeat themselves, and the more you see them occur, the better you’ll be to recognize then trade them in real time during the day (when emotions are high!).

Keep studying today’s action for additional insights.

Corey Rosenbloom
Afraid to Trade.com

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

Travel to the LA Trader’s Expo in June to hear Corey speak on “Idealized Trades for Intraday Traders”

8 Comments

8 Responses to “Two Flags and Two Cradles on April 8 SPY Intraday”

  1. gawed Says:

    i can only say that your intraday posts are so useful. you know i havent being reading you for long but today i was able to spot the bull flag and late craddle in the beginning easily! the bear part took me unprepared tough lol

  2. Corey Rosenbloom Says:

    Thanks! That’s why I love doing these posts – I want to point out these patterns so you can get acquainted with them and see them unfold in real time. Make these patterns your own – own them. Know them. They repeat – not every day of course, but enough to give you decent trading opportunities.

    Thanks for the encouragement!

  3. Anonymous Says:

    Cory !!
    You are the Guru of technical analysis . Could you please give me an outline as to how I should use the TICK for my trading , like how do you set it up in your chart , what changes do you look for in the tick and what are the normal values in which it should trade. Or please suggest me a good learning material for using TICK
    regards
    Vasu

  4. gatsal Says:

    What are the lenghts of your EMAs ?

  5. planetelex Says:

    Great post Corey! Thanks

  6. Corey Rosenbloom Says:

    Vasu,

    I’ll try to do that in an upcoming post. I’m just learning the intricacies myself.

  7. Corey Rosenbloom Says:

    Gastal,

    20 EMA
    50 EMA
    200 SMA

    Across all timeframes and markets.

  8. Corey Rosenbloom Says:

    Planetelex,

    Thanks! I enjoy these teaching posts and am glad to have positive feedback.