Trading plan for a broadening top pattern or the megaphone pattern.
Compare the high starting the first move down to the high at point 2. It is a higher high, then we go to the next high point 4 and see that it is even higher. The S&P500 emini futures is playing into a technical trading pattern known as the megaphone.
What are the Characteristics of the bullish megaphone pattern?
The characteristics of a megaphone is that the highs are getting higher and the lows are getting lower on 2 consecutive legs of a trading chart.
Compare the high starting the first move down to the high at point 2. It is a higher high, then we go to the next high point 4 and see that it is even higher. The Lows at point 1 and point 3 are relatively the same. Drawing a trend line from the beginning to point 2 and 4, and then a supporting trend line from Point 1 and 3 you can see that the form diverging, this is called the megaphone pattern. The most optimal one would have the lows at point 3 lower but being the same also is a key to the pattern.
Point 4 is the temporary new high with a 61% pullback or retracement to point 5. This sets up the Green Zone where we can see the pattern from point 1-3 repeat or a break to new highs after a pull back to 50% of the distance of the move from point 4 to 5. Note the green supporting line at 2070. If this acts as support, then we might see a break of the top in the near term with a target to 2140.
Incorporating the bullish megaphone pattern into your trading plan.
If price breaks the support of the green zone, then watch for a move to 2000, the pschological support and where the 200MA is headed, and then further retrace to 1960. There is an open gap at 1940 that has not been filled. Remember to do your own work, study the charts and if you don’t know what you are doing, don’t trade. Trading is high risk, and you need an executable trading plan.
Weekly Trading Plan – Money Maker Edge™ day trading course March 2015
Trading plan looking at the weekly chart on the S&P500 emini futures market for March 2015. Last week we closed with a Doji and a move down of 30 points. The range of the week was 50 points and showing move commitment on the seller side volume.
The sellers have taken a little of the steam away from the buyers but have not made a big enough commitment to carry through to break the next level of support and open gaps from previous trading sessions. Watching for the buyers to move in and bring this back up 12 to 18 points before loosing momentum and turning back over to seller to continue this move down to 2035-40 where the next level of support can move in.
If we see large buyer support at the 2035 to 40 area and some follow through in the days that follow this could be enough to engulf this past weeks price action and keep is moving in long term bullish trends channel.
If we see sellers commit to more volume and a move through the 2035 support then we could see a test to previous swing lows and area of consolidation from from 1964 to 2035. The S&P500 emini futures consolidated in this zone for 5 weeks before getting enough pressure built for the three week move to highs.
Note the uptick in volume last week on the sellers moving in and how far below the Moving average we were on the move to the highs.
Trading Plan on the Daily Chart for the S&P500 emini futures contract.
Trading plan for daily price action. We moved to close this open Gap as noted in my previous article, and if we bounce off of support for 50% of the previous trading days range to 2080 area and loose momentum with buyers, then I will be looking for this to reverse and sellers to pick up and gain enough momentum to break the previous sessions low and move to 2056 where the 50 MA could add support. If there is a lot of momentum we could see this break to the next support level and break through to the 2026 support and then further to 1998 area of psychological support and follow through the swing lows of 1960. There would have to be some type of stimulus for this type of price action.
If buyers do hold this area and price bounces around in the 2065-80 range then we could see a test down and then spring through the resistance at 2088 and a break through of resistance and a move back to the consolidation zone at the top of the market.
There are many clues in the this market for direction and if you are not familiar with risk management and making a written trading plan it is probably better not to trade. Trading can be high risk and there are many variable to be monitored and understood before trading.
Trade your plan. Trade what you see, and never listen to anyone. It is your money, be responsible.
Trading Plan – managing open gaps in the S&P500 emini futures.
The first open gap at 2070 was filled today. Next support is the 50MA at 2056 then the 2020 open Gap.
Keep these targets in mind as the Topping pattern on the S&P500 emini futures executes. Remember this is a supported market and there is always a chance of a snap back rally.
The dollar index has made an equidistant move on the market and is showing more strength for a continued move also.