Transcription
The same way you'd feel about your side chick when your wife gets home. Bulls really need the price to bounce. With the critical level tested today, can bulls pass the test and recapture some lost levels? Or will they fail like Jon Jones after the Daniel Cormier fight? Tune in now as Uncle Charlie will reveal his trading plan for SPY, sheep style. Bam!
Back in February February, all the way into March, SPY was bearish. And when it started recovering, right around April, we had this big old gap up. We had some good news from overseas. We had this big old gap up. And as you guys can see, it recaptured the 50 daily moving average. That's this orange line. And since we recaptured it, we went on this crazy bullish trend phase that lasted for a while. We had some minor pullbacks here and there, but it was bullish.
It lasted for a while up until recently, in June, early June, earlier this month. We had a nice pullback. A nice pullback, a nice drop, a nice correction all the way from 760.4 high down to a 722.5 low. Beautiful. We recently rolls back up. Then we pulled back again, and that takes us into today, back testing the 50 daily moving average as a support.
You know, something that makes me trust a breakout, right? Something that makes me trust a breakout. Let's say this line right here is my resistance level. When I see a breakout, when I see price breaking out, right? This red line would be the price. When I see it breaking out, what makes me trust the breakout more is when it pulls back a little bit, retests that previous breakout level as a support level, that previous sell zone as the new buy zone. When I see that there's evidence of buying pressure, when it hits that support and recaptures a a resistance level, clears a resistance level, that tells me the market makers accept that previous sell zone as a buy zone. That's very bullish. So, I like to see it break out, retest as support, and then it continues upwards. That's how I trust breakouts.
So, when we zoom out onto the daily chart, we see that we broke out or recaptured the 50 DMA back in April, and now here we are for the first time in months, back testing that moving average as a support. So, what happens next will be very telling.
And from here, now that we zoomed out, from here we need to zoom in. Oops, sorry. We need to zoom in so we can take a look at the context a little more. We can see that we had this big red candle June 17th, and then the next two candles were inside candles. Today, we broke down that mother candle. The setup for the inside candle ended today bearishly. It even took the previous buy zone and today turned it into a sell zone. You can see with the wick today. That's overall bearish price action, even in the short term. But, as price action traders, we need to be unbiased and be ready for any case scenario.
Now, before I reveal to you guys the bull case and the bear case and talk about the levels, there is one more thing I want to mention. You see, you guys notice this downtrend line that I have. So, when I look at these candles right here, when I connect June 9th to June 11th low, we actually get a third touch, which connects with today's low. So, here we have a structure revealed. A structure revealed.
Now, this makes me want to zoom back out. You see, the market goes through two phases: the trend phase and the chop phase. The trend phase and the chop phase. The chop phase can also be considered the pullback time, the correction time. But, overall we have a trend phase, which would be this. This whole thing right here. That was a bullish trend phase. Now, what we have recently since June is the chop phase. We've been consolidating, and it revealed to us today that it is a big old triangle pattern.
So, not only did we retest the 50-day moving average as support, we're also at a support line based on this triangle structure. Once again, I have to say, if I didn't say it already, the bulls need a bounce. And if there was ever a time to bounce, the time would be now.
Now, this brings me to the bull case scenario and the bear case scenario. I I urge you guys to stay tuned for both because we want to be prepared. So, I'll talk about the bull case scenario first, then the bear case scenario.
Obviously, I said we hit a support level. Now, if we hit support, how do we know if we can trust a bounce from here? And for me, the answer is if it hits support, can it clear resistance levels? Can it recapture levels that it previous previously lost? For me, that first level which it lost today is at 7:37. That is a Fibonacci level. 7:35 is the breakdown level of this triangle pattern, right around there. Actually, 7:33.5, actually. Right around there. So, for me to trust a bounce from here, 7:35 and 7:37 must clear to try and trigger a bounce. 7:40, 7:42, 7:54, 7:46 would be my target, but based on this structure, it wouldn't make sense that we can get back to the top of the triangle pattern. Like I said, to trust a bounce, it needs to recapture some lost levels starting with 7:35, 7:37, and 7:40.
Now, if we don't get a bounce, here's the bear case scenario. We need the breakdown. 7:33.5 is the breakdown of this triangle pattern. 7:32 is around where the 50 DMA is. We break down those two levels, guys. SPY is possibly entering the next trend phase. And the next trend phase is possibly bearish.
So, watch this structure. If we get a bounce from here, or do we get a breakdown? The price action will answer that question, and you guys will know what the price action says because you guys know the levels and the setups, and we're going to trade it unbiasedly. Peace.