Stock market price action analysis suggests possible bottom

Trade setup analysis

Stock market, technical analysis Stock market, technical analysis

If Thursday’s selling was inflated by pre-weekend fears… then should Friday morning’s rally have held onto at least some of its gains? Closing unchanged in such a wide intraday range, following two wide intraday slides, is an opportunity for a bottom. An opportunity. Meanwhile, it maintains potential simply to resume the decline.

Pattern points… (Setups and technicals)

Friday’s 1375.50-1376.00 close was only fractionally (decimally?) higher than Thursday’s close. In any case, it was not negative. And a future negative close is all but assured by Wednesday and Thursday’s breakout and confirmation. So, this is not a low.

At least a new low close on Friday was avoided, which would have signaled the trend’s momentum intact. It may be intact for other reasons, but that’s one fewer.

The 1363.50 pre-open low was arrived at by probing the prior low temporarily, and then trending down lower. This is a “new Globex trend extreme” that requires being retested intraday.

Friday afternoon’s trading range formed a Descending Triangle. A very wide one, at that. Closing back under 1376.50 suggested that it was preparing to break lower, with sufficiently lower targets to consider holding-short through the close. The setup is much less attractive into the weekend, since liquidity is days away in case of gapping up.

And gapping up instead is possible. Price trended down into Friday’s close, and the afternoon’s ~1384.00 high printed before the final hour. So, gapping up Monday to and/or through 1384.00 would trigger a “session-long rally” setup. And gapping up at all Monday in this wide of a range could gap up a lot.

What’s Next… (Outlook and opportunities)

With a lower target in-play, and the potential for another corrective bounce, the Saturday Strategy Session will have plenty to discuss. Especially individual stocks, many of which have been jarred loose by the past week’s action. See you there, say 9:30-ish? Great!

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.

About the Author
Rod David

Rod David develops analytical techniques that are designed to efficiently identify targets and turning points for any liquid stock or market in any time frame. He primarily analyzes S&Ps, generating several round-turn candidates daily. Rod publishes "Trading Plan" and more each session at the blog

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