Taking profits In S&P500. Expecting All-Time-Highs To Be Tested

Taking profits In S&P500. Expecting All-Time-Highs To Be Tested

 S&P500 flew over the 3130 target, discussed in the last week's blog article. This target was firstly reached, on Wednesday when the market hit 3129.50. It was a tough decision for me to close the long position or keep it open. Because it was a long ride, a lot of consecutive up days, target reached and R/R is at 1:3. With all this profit-taking wasn't out of the question but I decided to focus on price action. 

I've checked the techniques mentioned in the Talking Chart Book and nothing suggested closing the trade:

  • Wednesday's bar wasn't a No Tail
  • It wasn't a No Nose either  
  • It was a Normal Long Body with ATR(1) = 55.25  

So I've decided to place the stop-loss below the low of that day and wait. 

The position was finally closed on Friday, almost at the close of the NYSE session.   

S&P500 analysis 06/08/20 - 06/12/20

As you can see from the chart there is a lot of volume on the last day. Also, Friday is BLB bar with one of the largest ranges so far in that up move. You can see highlighted that last daily bar of such size and what happened after it. 

That is why I closed the trade. The labour market unexpectedly improved and gave a boost to the indices. It is good to get a better-than-expected data but I believe that this is already in Friday's prices. There was a lot of buying which came after a strong move up in the last two weeks. That is why I think that the market is up for a pause or correction. 

Now I expect a few small range bars which will lead to another long signal and a test of the all-time-highs for S&P500 (Nasdaq100 is already there). 

Since BLBs lead to a bar in the opposite direction in 66% of the cases I expect Monday to be a down close. But there is a high probability to see a breakout of the Friday's high first and then see a move down.

For Monday's candlestick:
- Long Tail with a down close (most probable)  
- Long Body with a down close
- Long body with up close   

Now, let's find your missing piece!

Vassil Banov,
Founder of Piece of Trading

Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer
Seasonal indicators courtesy of Larry Williams, ireallytrade.com. Charts made with TradeStation®. tradestation.com

TAGS: S&P500, SPY, SPX, Price Action Trading

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