I didn't have much interest shorting equities but this setup is worth the risk. 11pts for potentially 100+. New year's around the corner and bulls are making room for bears to play. If this works out, can add more shorts on break of lower trend line.
Trade active
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First set of shorts are in
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Tightened stop to just above the 77 high. A strong bear response should be pulling a strong close below 2270.
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Daily candle close looking good to go bear. I'll be adding positions with the trade plan - shorts with sl strict 2288
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If bears break down 2247 before retesting high then I'll consider 2277 as the top. At this time this remains a high risk trade - can still short but 2288 is SL and can get hit
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There's no bearish impulse move down that I can positively identify. So this is the flat correction I'm tracking as TP target - 2242 gap fill.
I'm assuming the market would hike SPX up for year end audit assessment so there ought to be more chances to short.
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Tracking update. If I wanted to buy SPX I would look to long with this setup
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Look to TP the next dip and bounce off around 2243-2237 area. Risk 11-gain 40 was a decent trade.
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Strike at 2232 was a good TP point. I took off profits but 2277 top/2288 SL is still valid.
There are 2 scenarios I'm looking for now: Bear: Price needs to make a new low before closing above 2256. Then I'll want to see a 5 wave move up that fails high to confirm 2277 as major top and short for 100 points (tp 2170) is live.
Bull: Price wicking off 2231 should break 2277. We can still short between 2277-2288. Risk is tiny.
Happy new year everyone.
Trade closed manually
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My actual close was 2242. The price wick off 2232/31 broke 2277 as expected. I'm not shorting because h4 still in wave 4 bull. So I'm waiting to see wave 5 trips the 2288 and invalidate this short setup. If not I consider its a 5th wave failure and very bearish.
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I'm not shorting again due to possible ending diagonal as 5th:
If 2259 fails first then my 5th wave count is wrong and i'll look to go bear
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kunsan
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I was trapped in a small long position from 2270 (when I thought the triangle was breaking upwards) and was able to exit that position at a small loss at 2248 this morning (Far East time). Here in the Far East the S&P Future got a big spike up to 2252 and is currently trading at 2246. Although I'm disappointed at the small loss, I'm happy to have had the patience to wait for a bounce in order to exit.
I can't identify the pattern in the current downtrend, except the slight possibility that it is a falling wedge developing. If so, the cash market won't reach 48/52 and might fail around the 40 area. Uncertain and happy to stand aside until I see something with a high percentage success probability. I'm watching for the 2227 area which is where C=1.618 (if it is indeed an ABC top pattern).
The Bradley roadmap suggests a negative tone until the next date of January 8th which is expected to be a low of sorts, but of course the market can rally between dates.
OwenMohd
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@kunsan, sorry to hear abt the wedge trap. Its normal tho. I saw the pattern mess as B and i avoid that phase like the plague.
kunsan
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Can I ask how you have calculated the 2231?
OwenMohd
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@kunsan, hi kunsan. Sorry I've been travelling and missed your posts. I agree with your assessment that we should still consider all of these moves as 3 wave correction. That's why I just took profits off for year end.
2231 is the 161.8 reverse fib off of A low and B high. Also it's close to nearest 10th. I would expect bears to try hit this mark, maybe a good buy point to retest high again
kunsan
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Thanks for the update. Excellent work.
TakaOhashi
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wave 1 and wave 4 are overlapping so this chart is invalid
Very nice idea. I agree that W5 cannot be longer than W3. However, watch for 2267/9 followed by 2300 for a complete ABC. Bradley stuff suggests Christmas/New Year might be turning point from a high.
OwenMohd
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@kunsan, if S&P hits 2300 then this short setup is invalidated completely. SL cannot be higher than 1287/88 (depending on ur broker quotes)
kunsan
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@OwenMohd, consider the alternative that where you have wave 3 is actually wave 1 (wave 3 being 0.618 of 1 and therefore could be a complete small abc from 1810). Therefore the current action will be part of wave 3 of the diagonal. In other words the lower trend line of the wedge could start where you currently have 4.
I can't identify the pattern in the current downtrend, except the slight possibility that it is a falling wedge developing. If so, the cash market won't reach 48/52 and might fail around the 40 area. Uncertain and happy to stand aside until I see something with a high percentage success probability. I'm watching for the 2227 area which is where C=1.618 (if it is indeed an ABC top pattern).
The Bradley roadmap suggests a negative tone until the next date of January 8th which is expected to be a low of sorts, but of course the market can rally between dates.