Examples of Weekly chart analysis
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S&P New All Time Highs - Risky Buy
The Emini and S&P 500 made a new all time high again today, leading many to believe this market is still strong. In some ways it is, but it is more important to realize it is also in a bull flag trading range. This makes it a risky place to buy up here. This is where strong bulls who bought lower will start looking to take profits, and strong bears will start looking to sell for a move down.
Why is it risky to buy now? There is only a 40% chance of a measured move up based on the height of the trading range. And the risk needed to enter now is large (below the bottom of the trading range). There is at least a 50% chance of a test down soon, back into the range. The middle of the trading range is a magnet and will likely get tested before the bull trend continues. Furthermore, if the bears are soon able to create a strong reversal bar for the large wedge, it could increase the probability to 60% for two legs down. If there is a quick and large move up in the next few weeks, it would likely act as a climax and final flag reversal, increasing the likelihood of a sell off.
Dont think just because there is no reversal yet that the market cant or wont sell off. Look at the past two sell offs from this area. They began from bull bars (Jan 18 two bar reversal), or small inconspicuous bars (Sep 18 doji to outside bear bar). But the follow through was strong and fast. Of course, this does not mean a shorter term trader cant buy and make money. Day traders can do many things investors do not or should not. But as far as a long term investment, this is simply not a safe one to buy at the current price level unless you are willing to sit through a deep pullback and scale in. And if you are - why not just wait and buy then?
TSLA reversed up from a failed bear breakout and sell climax. The bulls have closed the exhaustion gap and created several potential breakout gaps around 200. The bulls now have a 60% chance of creating a second leg up and test of the middle of the upper trading range around 300. The bears need a strong breakout below the 180 higher low. The probability of this is 40%.
Once prices get back into the 260-360 trading range, prices will once again return to a 50/50 directional probability. If the bulls continue to get strong consecutive closes, and the bears do not get any strong selling pressure, the probability will slightly favor the bulls for a test of the high of the range.
VFF has pulled back in two legs sideways to down after a strong bull rally. The bulls have a 60% chance of a second bull leg up before there is a strong bear reversal. Last week broke below the 14 first leg down. This is where the bears need to be the strongest. This is also where strong bulls (and bears) will start looking to buy for trend continuation. However there is not yet a strong buy setup. If this week closes on its high, it could signal the end of the correction and soon enter a bull channel phase for a second leg up.
There are many bull gaps below, and the rally contained strong buying pressure. Furthermore, the sell off has not been all that strong. Last week was one of the strongest bear bars, and created a gap around 14. Since there are no previous open bear gaps, this one will likely be filled as well, and may act as an exhaustion gap. The bears need to keep the gap open and create strong follow through selling to increase their probability to 50% for a test of the bull breakout.
BYND is in a strong and tight bull channel since the IPO . This bull trend from the open is what a trader wants to see when buying for long term investments. Last week formed a reversal attempt. When the market is strong, first reversal attempts fail 80% of the time and instead create the start of a second leg up. The bears will likely need some form of second reversal attempt like a large low 2 or failed bull breakout (they act the same), in order to increase the likelihood of reversing the bull spike. Even if there is a good bear reversal, the bulls will likely look to buy again around the 50 open. If the bear pressure is not strong, the bulls will look to form a spike and bull channel which usually forms after two legs sideways to down, and generally stem from a high 2 or wedge bull flag .
WEED is in a broad bull channel with good buying pressure and no strong reversal yet. The bears are currently attempting to form a lower high, but prices are stalling at the EMA. The bulls have a breakout gap below around $47.50. If it remains open, prices will likely test the all time high. A new all time high could form a wedge reversal down, at which point bulls will likely take profits and wait for two legs sideways to down before buying again, unless the reversal is strong.
Examples of Day Trading Analysis (ES/SPY/MES)
A weak bull trend day that evolved into a trading range.
The market opened always in long from the previous day's strong rally from a wedge reversal (nested and larger). The bears attempted to form a bear trend from the open, but failed on the third bar and were unable to fill the bull breakout gap. There were a few reasonable buy setups shortly after the open, with the appropriate stop below the micro double bottom (blue bar), or the prior days low (either were acceptable). However prices formed a nested wedge reversal, where it was a good idea to exit even with a loss.
The bears filled the bull breakout gap, but failed to break below the opening low. It was a bit risky to take the first buy setup since it was a doji bar and there was strong selling (reasonable to expect a second leg down from the wedge). The second leg down failed, and resulted in an outside bull bar / high 2 bull flag. The stop was below the low of the day. It was reasonable to take profits after the tails formed and larger parabolic wedge reversal with a good bear bar (red arrow).
Once again the bull gaps were filled, but the bears could not break the swing low, and prices set up two good high 2's. Again the best stop was below the low of the day. When prices formed a double top with the larger wedge, it was reasonable to take profits. The market went mostly sideways in a tight trading range after this point, until the second leg down from the wedge reversal into the close.
Strong bull trend day. Bull trend from the open after a failed bear trend from the open on the first bar of the day. The first best trade was the (1) high 2 variant and failed bear reversal. The bears attempted a wedge reversal which failed on (2) setting up a high 2 / failed low 2 / failed wedge and double bottom. This setup was very similar to the day before setup; trade (1). From here prices entered a very strong buy the close bull trend. After the 5 bar buy climax (BCX) prices sold off in two weak legs down to the EMA, setting up a large high 2 / failed reversal at (3). However prices did not get very far and remained in the small trading range (bulls taking profits). There was also a wedge bull flag buy setup just before the close (not noted).
Bull trend from the open which quickly entered a bull flag trading range / weak bull channel. There were no best trades (trading range), however some good trades. The bar 1 outside bull bar high 2 / failed low 2. (2) high 2 / failed nested wedge. (2) expanded into a larger wedge which was a reasonable place to take profits. From there prices remained in a very tight trading range and it was best to avoid trading.
So far this week has been similar to last week but in the opposite direction. Most days last week were trading range days with a bull bias. This week has been mostly sideways with bear bias. Today was a bear trend day but spent most of the day in a small range. The best trade of the day was the 1 low 2/failed high 2 test of the bear breakout gap. It was reasonable to take profits on the 2 double bottom and nested wedge, or the 3 failed bear breakout. After 2 prices went into a tight trading range until the bear breakout and 4 parabolic wedge.
Today was similar to yesterday, and was a bear trend from the open. The bear trend was stronger today than it was yesterday, although still had some two sided trading for most of the afternoon. It was reasonable to sell below 1, (failed breakout yesterdays high, strong and large bear bar with gap), but the risk was relatively large. After entering a sell the close bear trend prices rallied for two legs to 2 and formed a bear channel. The best trade today was 2 (large low 2 and failed bull reversal). It was reasonable to take profits on the 3 failed breakout and wedge. Prices formed another low 2 on 4 which led to another leg down and larger wedge reversal at 5.