SPX Bullish Bat Connected to a Potential Bearish Cypher
Idea ---> LONG
SPX
then SHORT
SPX
SPX
At this point, it is pretty clear that the market is in a downtrend. It is likely being supported by the "Buy the Dip" traders. You can see the parallel downtrend channel if you observe further to the left in the time line.
My hypothesis is that we will have a bullish day on 07/07/2017 due to the Bullish Bat Pattern completion. Then, we will become bearish once we reach the upper part of the channel due to the completion of a potentially bearish cypher pattern. My guess is that we will reach the cypher completion by the end of the day on 07/07/2017 or possibly near the open of 07/10/2017. Of course, the timing may be off a bit, so wait patiently if this materializes.
Idea #1 (If you want to participate in the Bullish Bat): If the open on 07/07/2017 is similar to the closing index value from 07/06/2017 (~2410 or slight gap up by a few points), then consider buying some calls or selling some puts. Use stops slightly below support, which is ~2405. Perhaps a good stop is at 2399 or 2400, risking about 5 points. The expected move up is about 18 points (~2428 objective). Using single-day options one strike away will likely be $200/contract or less. So the risk is about $200/contract or less (if expires worthless), reward/profit of about $1000/contract (if the wave rides all the way to the resistance section of the price channel). If the stop loss is hit, you can probably sell the contract back for $100/contract if it's still early in the trading session, thereby only risking $100/contract instead of the full $200.
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Idea Above is Connected to the Idea Below by a Zigzag (Observe Chart):
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Idea #2 (If you want to participate in the Bearish Cypher): If idea #1 has materialized, then there is a pretty good chance the Bearish Cypher Pattern will take place because of the downtrend channel. This channel needs to be broken to the upside in order for the bearish downtrend to be proven otherwise. Other than that, the direction is clearly down from ~2428 resistance. As mentioned previously, we'll probably reach that index value on 07/10/2017. Using single-day options, buy some puts one strike away or sell some calls. A good stop loss would be about ~2433. The reward could be an estimated 23 points (~2405 support). A break below that would probably give a reward of about 41 points (~2387 support).
Of course, all the ideas above are subject to time sensitivity and materialization. You may need to adjust some parameters to this idea as the market price action unfolds. Keep a flexible mind and adjust your positions accordingly. Remember, it's not how you want the market to behave, but rather how the market wants you to behave (if you want to be profitable).
SPX
then SHORT
SPX
SPX
At this point, it is pretty clear that the market is in a downtrend. It is likely being supported by the "Buy the Dip" traders. You can see the parallel downtrend channel if you observe further to the left in the time line. My hypothesis is that we will have a bullish day on 07/07/2017 due to the Bullish Bat Pattern completion. Then, we will become bearish once we reach the upper part of the channel due to the completion of a potentially bearish cypher pattern. My guess is that we will reach the cypher completion by the end of the day on 07/07/2017 or possibly near the open of 07/10/2017. Of course, the timing may be off a bit, so wait patiently if this materializes.
Idea #1 (If you want to participate in the Bullish Bat): If the open on 07/07/2017 is similar to the closing index value from 07/06/2017 (~2410 or slight gap up by a few points), then consider buying some calls or selling some puts. Use stops slightly below support, which is ~2405. Perhaps a good stop is at 2399 or 2400, risking about 5 points. The expected move up is about 18 points (~2428 objective). Using single-day options one strike away will likely be $200/contract or less. So the risk is about $200/contract or less (if expires worthless), reward/profit of about $1000/contract (if the wave rides all the way to the resistance section of the price channel). If the stop loss is hit, you can probably sell the contract back for $100/contract if it's still early in the trading session, thereby only risking $100/contract instead of the full $200.
--------------------------------------------------------------------------------------------
Idea Above is Connected to the Idea Below by a Zigzag (Observe Chart):
--------------------------------------------------------------------------------------------
Idea #2 (If you want to participate in the Bearish Cypher): If idea #1 has materialized, then there is a pretty good chance the Bearish Cypher Pattern will take place because of the downtrend channel. This channel needs to be broken to the upside in order for the bearish downtrend to be proven otherwise. Other than that, the direction is clearly down from ~2428 resistance. As mentioned previously, we'll probably reach that index value on 07/10/2017. Using single-day options, buy some puts one strike away or sell some calls. A good stop loss would be about ~2433. The reward could be an estimated 23 points (~2405 support). A break below that would probably give a reward of about 41 points (~2387 support).
Of course, all the ideas above are subject to time sensitivity and materialization. You may need to adjust some parameters to this idea as the market price action unfolds. Keep a flexible mind and adjust your positions accordingly. Remember, it's not how you want the market to behave, but rather how the market wants you to behave (if you want to be profitable).
A) Ideally, an overshoot of about 3 to 5 points away from this area to about 2428-2430 at the open. Get puts around there and risk only a few points.
OR
B) Continue from the close and proceed lower. Again, get puts around there and risk only few points.
OR
C) Gap down a few points and head lower. Again, get puts around there and risk only a few points.
The reward for the next potential leg down could pay out handsomely.