Just an FYI: A follower of the site just informed me that the SPY went ex-dividend today, which I was not aware of. Typically, a stock or ETF will drop by roughly the amount of the pending dividend on the day it goes ex-dividend. When drawing patterns, trendlines, etc.., I don’t make adjustments for dividends since it typically balances out over time but even though the $SPX itself did gap slightly lower today, it is very likely that a good portion of the gap down in the SPY was due to the fact that it went ex-dividend today. Nonetheless, my primary scenario remains the same and from a pure technical perspective, assuming that the SPY does close below yesterday’s lows, a pattern is a pattern so we’ll just have to see if we get the expected continued selling going into next week or if prices move back above yesterday’s prices. Best to continue to keep things on the light side for now, trading only the best setups, long and/or short, and remain on the lookout for any early technical signs that the uptrend is in jeopardy. Here’s the updated $SPX weekly chart.
We still need to see how things close today but so far, today’s gap down in the SPY has put in a potential Island Top Reversal pattern, which helps keeps my primary scenario alive. If these scenarios do continue to play out, my expectation remains that we will most likely see weeks (and months) of previous gains wiped out in mere days (weeks). Maybe this plays out, maybe not but if so, I would expect things to happen very fast, catching a lot of traders off guard. It would be prudent to remain selective with establishing new long positions at this time and have stops in place in order to protect embedded gains. Updated daily SPY chart followed by a zoomed-in version of the same daily chart detailing how things might play out over the next few weeks.
The NIHD long setup has triggered an entry on a break above the 60 minute bullish falling wedge pattern. Volume so far has been just about average but then again, low volume breakouts seem to be the norm lately. As the entry price was around 4.60, consider a stop below the 4.35 level if targeting T2 or T3 or a higher stop level if only targeting T1.
RAX was a short trade that recently hit it’s final target for a 30.2% in under 3 weeks from entry. At the time, I suggested booking full profits and considered the trade completed as a bounce was very likely but I also added an additional downside target for those wanting to let some of their position ride or for anyone wanting to short or re-short RAX on a bounce. The stock did make a healthy bounce from there and then set up in a beautiful bear flag continuation pattern (shown clearly below on the 4 hour chart), of which it broke down from recently and has fallen sharply since. What makes this such a nice example of a bear flag pattern, besides the well defined-flag, is the impulsive selling on both the “flagpole” leading up to the flag formation and the subsequent impulsive selling immediately following the price breakdown below the flag. The common measurement for a bear flag pattern is to take the distance of the flagpole and add it to the top of the flag, as shown on the 4 hour chart. I did add one more possible target which is slightly above that flag projection but lines up with some pretty solid support. However, I still prefer T4, the unofficial final target at 45.65.
The AAPL long setup has triggered an entry as of the open today. I continue to maintain that the risk/reward to entering new long positions at this time is unfavorable so consider keeping your position size on AAPL light enough that you can allow to add on a backtest of the wedge, should this breakout get sold into or dragged down on a correction in the broad market. Updated 60 minute chart shown here. Target remain as marked on the previous 4-hour charts which can be accesses by clicking on the blue AAPL ticker symbol at the bottom of this post. A stop below 420 would be objective considering the first target of 482.50, providing just over a 4:1 R/R on the trade.