In my previous post I indicated a good R/R sell opportunity. A small update now given the latest development.
We see SPX is retracing back up. It found support on a trendline (clearly testing it), and locally we do not see a lower low but a higher low. It seems SPX is gonna test the resistance of the right shoulder top(orange line) that was recently formed. However, if it finds again support on the trendline it is a good opportunity to battle to new local high's.
I'm not saying the good R/R entry is invalidated, but a signal of strength has been given by the market with the higher low/support on trendline. Be careful. Let the market give clear signs of direction first - one of the two drawn scenario's - before you take position.
If you are in this trade already, when would you say it get invalidated?
pptw
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@Jacub, thanks for the comment and spot on question jacub, I was wondering myself exactly the same. It is very worrying that we just made a new local high, and it offers bad hope. When you are in doubt between a small loss and hope, take the small loss.
Since we are still below 2900 I do consider the new local high as noise, and I consider the 2900 as valid resistance still. I did put the SL in the post at 2925 but I am considering moving it down to 2910.
Also, if we see retracement and it finds support at the trend line or at higher level than last local low, close your position.
Jacub
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@pptw, Thank you. You are amazing. I'm just learning how to trade and going through this process was very helpful. How did you come up with numbers for the SL?
pptw
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@Jacub, it was slightly arbitrary. It was set at 2925 with the idea of having 2900 as resistance, but a local high of 2920 at 28th of March. I did not want to get stopped out there while it could be resistance. We now see retracement downward after new high, the next half day should determine if we head for new lows or find support. Trade not invalidated yet, but close to it.
Tiomario
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Hello. Don't you think that the market is ruled by fundamentals, not technicals nowadays?
FED doesn't care about trends and support lines... ;)
pptw
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@Tiomario, Very good point, yes. I do agree. News and fundamentals are driving price more than technicals, but since my knowledge and understanding is limited, I approach it technically. It is a fair discussion, and I am sure you can read dozens of posts, blogs, articles and books about this topic. Also there will be plenty of other experts who can argue much better what is leading and what is not.