Head & Shoulders Failure, S&P 500 to Rally Towards 5400
Trend Analysis
The main view of this trade idea is on the Daily Chart.
The S&P 500 Index exhibited a failed Head & Shoulders setup. The Head can be seen around the 4800 level which are the previous all-time highs. The Left Shoulder is observed around the 4550 resistance in early September 2021 while the Right Shoulder can be seen around the 4600 level in early to mid-February. Neckline is highlighted around the 4200. The S&P 500 had a couple closes below that level but ultimately the Index rallied above those levels.
The holding of the 4200 support is seen as an extremely bullish sign as this chart pattern setup formed over several months and ultimately failed. If the S&P 500 can get back above the Head of this pattern setup, it can rally towards 5400 in the medium term. This view will be negated if the S&P 500 Index closes below 4190.
Technical Indicators
The technical indicators support the S&P 500 Index’s trend reversal. The Index closed above the resistance level of the Supertrend indicator as well as closed above the 50-SMA. Bullish divergence is seen on the Awesome Oscillator. Also, the RSI also illustrated some bullish divergence and is currently trading above 50.
The internal price movements of the S&P 500 Index is also displaying bullish tendencies. The Index is above its 15-Min, 2-Hour and 4-Hour trend following Indicators.
Recommendation
The recommendation will be to go long at market, with a stop loss at 4190 and a target of 5400. This produces a risk/reward ratio of 3.30.
Disclaimer
The views expressed are mine and do not represent the views of my employers and business partners. Persons acting on these recommendations are doing so at their own risk. These recommendations are not a solicitation to buy or to sell but are for purely discussion purposes. At the time of publishing, I have exposure to the S&P 500 Index.
The main view of this trade idea is on the Daily Chart.
The S&P 500 Index exhibited a failed Head & Shoulders setup. The Head can be seen around the 4800 level which are the previous all-time highs. The Left Shoulder is observed around the 4550 resistance in early September 2021 while the Right Shoulder can be seen around the 4600 level in early to mid-February. Neckline is highlighted around the 4200. The S&P 500 had a couple closes below that level but ultimately the Index rallied above those levels.
The holding of the 4200 support is seen as an extremely bullish sign as this chart pattern setup formed over several months and ultimately failed. If the S&P 500 can get back above the Head of this pattern setup, it can rally towards 5400 in the medium term. This view will be negated if the S&P 500 Index closes below 4190.
Technical Indicators
The technical indicators support the S&P 500 Index’s trend reversal. The Index closed above the resistance level of the Supertrend indicator as well as closed above the 50-SMA. Bullish divergence is seen on the Awesome Oscillator. Also, the RSI also illustrated some bullish divergence and is currently trading above 50.
Recommendation
The recommendation will be to go long at market, with a stop loss at 4190 and a target of 5400. This produces a risk/reward ratio of 3.30.
Disclaimer
The views expressed are mine and do not represent the views of my employers and business partners. Persons acting on these recommendations are doing so at their own risk. These recommendations are not a solicitation to buy or to sell but are for purely discussion purposes. At the time of publishing, I have exposure to the S&P 500 Index.