SPX500 Technical Analysis: At Support, but Beware the Monthly Doji
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SPX500 Technical Analysis: At Support, but Beware the Monthly Doji

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Talking Points:

  • S&P 500 Technical Strategy: Long triggered with FIbonacci support at 2,065.45.
  • Another top-side, directional trend entry is available with current 'higher-low' support; but a Doji on the recently-finished monthly bar could highlight reversal potential for later in the week/month.
  • If you're looking for trading ideas, check out our Trading Guides . And if you want something more short-term in nature, check out our SSI indicator .

In our last article , we looked at the S&P working on what could've been 'higher-low' support at a previously resistant area on the chart. As we had written, traders would likely want to approach trend-resumption entries with caution as we sat ahead of a large group of data for the remainder of the week. We had instead looked for a deeper retracement off of one of three potential support levels using prior price action structure.

The first of those levels came into play on Friday of last week when the S&P crossed below 2,065.45; and this was in the midst of some aggressive selling; it didn't look like support was going to hold. But by the end of the trading session, pricse had moved back above 2,065, thereby denoting this as potential higher-low support. This could open the door for top-side re-entries using the Friday low for stop placement. But, one area of note that may become relevant later in the week, or perhaps deeper into May:

The Monthly SPX500 chart just posted a Doji formation, which will often show up near the top of a swing. April's Doji also comes in at a lower-high from the previous swing-high, thereby further denoting reversal potential.

Created with Marketscope/Trading Station II; prepared by James Stanley

This is still a very early observation as we're in the first trading day after that monthly candle completed, but should price action begin to show lower-lows on the 4-hour chart, a reversal setup may be afoot. The levels of interest to denote those lower-lows would be the same support zones we've been investigating at 2,040 and again at 2,021.12.

For now, the daily chart is still showing up-trend, and traders can use the low from Friday to base a stop below 2,052 (the Friday low), with eyes on 2,100 for initial profit targets. This would set up a 1-to-1.5 risk-reward ratio, with secondary profit targets cast towards previous highs at 2,111, and then again at 2,133.

Created with Marketscope/Trading Station II; prepared by James Stanley

--- Written by James Stanley , Analyst for DailyFX.com

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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