Stock, Option and Futures Trading
The SPY 135 minute chart is 70 bars from high to high and it is also at 70% so there is a price/time resistance square on the high of today.
Where we are here is an obvious level of resistance and normally I would be aggressive here to the short side for at least a move down to the $120 level plus we have gaps that might need to be filled.
If you are bearish right here is the short with a stop at the $126 level. If you are bullish then you would wait for the market to pullback into the $120’s and start buying.
Right here since we have a time/price square it makes for a good shot at the short.
Even though this is a 135 min chart which is like a Daily chart which is big where we are at could actually just be a minor level in the bigger pattern on the Weekly and Monthly chart.
It is levels like this where people go short on the smaller charts and then the market surprises traders by not pulling down into the $120’s and we blow through short-term resistance as the bigger charts kick in. It is the resistance being broken that starts the bigger chart waves. Just like from the low it is the short squeeze that gets us back to resistance.
Either way in the range of $115 to $126 the market can get emotional as one time frame fights with the bigger time frame.
Even though it seems like a clear short for me to go short with options we would have to commit to holding the trade for a few days and we would be vulnerable of the market gaping up and running. Pattern wise it would make sense to have a pullback from this level the question is do you want to play it.
I would say right now it is still too soon to enter the trade with the $120 target. On the other side we could gap down tomorrow and start the decline.
Instead of trying to prove the pattern right at this point I am going to wait and see how the rest of today trades maybe even into tomorrow. Right here is a place where the shorts will load up and if we hold we could have another short squeeze from this level.
The 70% square does hold me back from getting aggressive long right here but it is still too soon to short.
Most of the time the obvious is wrong and sometimes it is better to give the market more time.