Resistance

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ES has touched the original ST trendline extension that was broken on 3/10 (shown as dashed green line in the chart above).  That is a perfect back-kiss and we’ll see how this goes here–but pros sometimes use those old trend lines as a squeeze target.

I have drawn in tentative channel top as a dotted red line to show what the most aggressive counter-trend bears might be using as a trailing stop line for an entry made right at the back-kiss.  As I mentioned before, if a VST sell setup is valid—that trendline should not be broken to the upside.

If selling comes in here from the ST partials target for Stops and Targets (1324.75 from 1294) and a touch of the VST resistance band I have been showing at 1327-1331.50, the next lower target would be VST trendline support at about 1312 and then the bull stops under 1300.

If that dotted red CT line is taken out to the upside, the next target higher is IT trendline resistance at 1335 and then the top of the range/gap fill at 1338.

As I mentioned yesterday, there is quite a bit of resistance in this general area.  If it can be taken out to the upside, the last of the bears would be forced to cover above 1338 and the next VST resistance is way up at around 1372 area (resistance void).  If that happens, then I would start looking for spotter signals to form…but first things first.

VST bull/bear line on the day is at 1324.75…price action is bearish below/bullish above.

…my .02

ES Update

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The edge of the green-shaded ideal entry zone at 1301.50 was it yesterday for downside from the minor resistance at 1314.  Any CT bearish thoughts on the day were snuffed out when the tentative protective stop line at 1311 was broken.  ES has now rallied back just shy of the Stops and Targets short-term target at 1324.75.

Just above this area is a back-kiss of the original trendline support that was broken on 3/10/11 (shown as a dashed gray line on chart above).  That lines up with the bottom of a resistance band between 1327 and 1331.50.  IT trendline resistance is presently at about 1335 and the top of the range is at 1338.

Lots of resistance just above…

…my .02

ES Update

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The resistance I mentioned in my last post at 1314 is still holding and we have the pullback and break of the VST support trendline that counter-trend bears needed to potentially break lower.

I have drawn in a tentative dotted red trendline which the most aggressive bears might be using for counter-trend sell probes near 1314. If the initial selling from 1314 holds, that dotted stop line should not be broken on a snap-back rally.  That line is intended to establish a positive profit slope for the counter-trend trade as well as a defined exit point if one is wrong on the guess…successful trading is mostly about risk management.

As I have mentioned in recent posts, this is presently a range-bound market and the shaded green and red zones represent the higher-odds entry levels for those looking to trade a move toward the edges–with odds favoring a trending direction on either side of the center line at 1289.50.  However, those also define a volatility zone where traders who don’t understand the dynamics of the range often set tight stops and become easy prey in a light-volume environment.

First downside target is at 1301.50.  Short-term primary trend support is next at 1296 and lines up with VST support at 1295.25. If those levels were to fall, then stops under 1279 could be the next downside target.   If the tentative dotted red trendline resistance is broken on a snap-back, then 1320.75 becomes the next upside range target.

In the yellow shaded zones—the gain to risk odds are low for entry on trending trades, so VST counter-trend trading back towards those green and red ‘ideal entry’ zones can become viable for those nimble enough to take profits and honor the trailing stop line–and to rejoin the new trend once it asserts.

…my .02

ES 1314

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ES hit ST trendline resistance overnight at 1314 and this could be a spot where sellers come in with an eye toward running the trailing stops of those chasing the rally from near the range midpoint.

I have drawn in a dotted red trendline that represents the trailing stop line that aggressive countertrend bears might be using from the ST trendline resistance sell. If price breaks back above that warning line, then a ST trendline resistance breakout could be forthcoming, in which case 1320.75 would be the next upside target.

The gray VST (very-short-term) trendline represents bullish support for the March 16th rally leg. Bears would need to get back under that line to regain control and possibly trigger aggressive selling–and if that were to happen, the closest trove of resting bull stops are located under 1279.

Range trading odds favor an eventual retest of the 1338 high above 1289.50 (center point of the large range between 1241.25 and 1388) and that would make some sense from a spotter perspective. Ranges can be filled with back and forth zig-zagging as large players build positions for the next move. If ES were to drop back under 1289.50, the odds would shift to a retest of the range bottom at 1241.25, and that is how that works. The shaded green and red areas represent ideal entry zones for those trading towards a trending breakout—but in a range, the centerline can be crossed multiple times (as we have already seen around 1289.50) before a trending move takes hold.

For today, early watch is on the ST trendline resistance. If it holds on a pullback the gray VST trendline support would be the first downside target. Otherwise, a breakout of ST trendline resistance would be a bullish continuation move from the March low.

…my .02

Trading Range

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A new structural pivot is in place at the recent low of 1241.25 and so a new trading range has opened.

Trading a range-bound market is different than trading a trending market and this is where some traders who don’t realize that can get whip-sawed around the primary trend lines.

Stops and Targets now indicates a trading range between 1254 and 1324.75 (see screen shot above), which is more finely tuned than the broader range gain/risk envelopes that I have drawn in on the chart above–which targets the recent high at 1338 and the recent low at 1241.25. On my range, the shaded green and red areas indicate where favorable gain to risk ratios exist to target the outside boundaries of the yellow range.

Inside of a trading range, the pros will likely be looking to run stops from those who are initiating trades with tight stops near the middle of the range (presently at about 1289.50 for both Stops and Targets and the larger range that I have drawn in).

This morning, the initial push up hit the original trendline break sell at 1302.75, which was the upper target of the resistance I pointed out yesterday. So, with that target in hand—the range traders will likely sell it back to see if they can get the stops from the other side…and so the game goes.

As a general rule of thumb the odds favor long above the 1289.50 centerline and short below–and that generally agrees with what S&T is coming up with.

First downside target from the touch of 1302.75 is the VST trendline breakout line at about 1295.

VST bulls are fine above the dashed gray trendline support (presently at about 1289.50) but the momentum would switch back to stop hunting for bulls under that trendline.

…my .02