$SPX for the week 15 May 2017
The chart says it all! The short term range, 2380–2400 is holding price. There was an attempt to break higher on Monday and Tuesday, but it failed to close above the 2400 resistance level. For now we remain in the short term range and that is still within the medium term range that started in March.
Support levels are at 2380, the 50 MA at 2368 which is starting to flatten out and below that the stronger support levels shown on the chart.
Resistance is at 2400, which has proved to be a barrier on a few occasions and above that there is the top of a channel at 2450, before 2500 which may be a psychological barrier. A break of 2400 and holding above could be telling!
I still favour a break to the topside, but as mentioned in previous weeks, the best outcome is to wait for price to confirm. The possibility that 2400 is at the top of the ±2 month range and a return to the bottom remains.
Where does this leave me on my 3 trading methods:
Trend Following — I added to some of my current positions and will only be looking to take new positions if the S&P breaks higher. If I take a new position that is setting up at the moment and 2400 continues to hold and moves to the lower end of the range, I could find myself in a stock that goes nowhere. The higher probability trade is to be patient and go with the move. Adding to current positions is less risky because I have locked in profits and there is already momentum.
Mean Reversion — After taking some small losses the previous week, this past week did the same as the S&P — made some, lost some — flat for the week. It is part of trading, you can do the “work”, it doesn’t always mean you will get paid for it though, in fact you can also “pay to work”.
“Work” is defined as placing orders on End of Day prices if there are setups.
Swing — You guessed it, very little happening here. The only position that setup was a long in $EPP (Pacific ex Japan) which I am still holding. $ILF (Latin America) is a position I may look to hold longer term if it sets up, instead of my usual 5–7 day swing timeframe.
Conclusion: Another quiet week, be patient during these times and do not force trades, a break will eventually happen and that is the time to profit, it is easier money.
Any questions? Contact me:
Miguel — TravelingTrendTrader
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LinkedIn: Miguel Teixeira