SPY & QQQ Bear Flag Breakdowns

Both SPY (S&P 500 tracking ETF) and QQQ (Nasdaq 100 tracking ETF) have broken down below bear flag patterns on the 5-minute charts. Bear flags are continuation patterns, meaning they typically break in the direction of the impulsive trend leading up to the formation of the flag pattern. To calculated the projected price target of a bear flag pattern, you simply take the distance of the flagpole (upper white arrows on these charts) to the lower-most point of the flag and add that distance to upper-most point of the flag just at the point just before prices broke to the downside. Of course, this is only a general guide. I'll typically set my price target with support level nearest the projected target although other factors are taken into consideration as well.

The charts below were posted in the trading room yesterday, predicting an imminent reversal in the QQQ & SPY, along with the following comments posted while all US stock indices were trading solidly in the green yesterday:

"Favoring a reversal & red close in the broad markets today but still not confident enough to bet it hard just yet. Still short the small QQQ position from shortly before the close on Friday, may add if the white uptrend lines on these 5-minute QQQ & SPY charts break but just watching for now." Charts posted at that time:

...Followed by this comment & chart immediately following the market close yesterday: "Well I got that red close in the broad market that I was looking for, albeit by a small margin (SPY -0.02%). However, that nice end-of-day dump to wipe out today’s earlier gains helps to confirm my read on the market & likely indicates that the SPY will open tomorrow to gap down below this rising wedge pattern. (note: the Q’s also sold off into the close but managed to close positive although the Q’s are not as diversified or representative of the stock market as is the $SPX/SPY). Either way, still leaning towards some downside tomorrow but won’t bet it too hard." 


SPY 5-minute 2 Feb 1st

SPY 5-minute 2 Feb 1st

That "gap below the bottom of the wedge" I called for can clearly be viewed on the updated charts at the top of the page. As far as the unofficial short trade on the Q's posted in the trading room last week, I'm still leaning towards covering if/when we approach the S1 level on my 60-minute chart (102.50 area) although I may decided to start trailing stops as we approach that level to see if these bear flag patterns can play out to these projections.

2017-03-08T21:20:02+00:00 Feb 2, 2016 12:36pm|Categories: Equity Market Analysis|Tags: , , , |Comments Off on SPY & QQQ Bear Flag Breakdowns