Friday's price action kept climbing, avoiding plunge

Price Action & Setup Analysis

If Friday’s rally had stopped trending up, then the pattern’s alternative was to plunge. This stage of the pattern is like the shark metaphor, which supposedly must maintain its forward motion to avoid rolling over. While that can extend indefinitely, it is not accumulation.

Pattern points… (Setups and technicals)

Friday’s rally retraced too much of the prior Monday’s plunge to 1732.00 to be its correction. Exceeding 1780.00 still allows the bounce to be corrective, but a correction from prior highs. That’s not optimal for resuming the decline, but it’s still possible.

That, or Monday’s open can gap down, and reject all of Friday afternoon’s probe above its afternoon 1784.75 bias-up signal. Even that would not suffice, with the gap down needing to extend back under Friday afternoon’s 1777.75 bias-down signal for confirmation. Forming another distribution pattern without extending higher or reversing down would still be bearish, but possibly only to attack last week’s lows.

Potential for reversing down is suggested by Friday’s last hour. Although it probed higher and higher highs, each leg overlapped the afternoon’s 1791.00 bias-up target. Extra buying pressure was expended without gaining extra traction for the effort. But not gapping down or immediately rejecting opening strength would be unlikely to reverse down before the afternoon.

What’s Next… (Outlook and opportunities)

Quite a week, and quite a big question mark left at the end of it. Join us for this weekend’s Saturday Strategy Session to discuss the bigger picture. It begins at 9:30am, and we’ll discuss any other chart that interests you.

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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