4/8/2012 SPY #9

S&P 500 (SPY)

Daily Chart

-          The SPY is still making higher high and higher low suggesting a continuation uptrend but the recent move is showing some signs of weakness, so beware of a large pullback to happen.

-          If the momentum to the upside is strong enough, the SPY should bounce on the green uptrend line or the gap support level @ $138.1 and take the stock to the 2008’s high @ $143.32.

-          Notice that the SPY has been trading above the 20 day moving average (yellow in color). If the SPY can’t climb above the 20 SMA again in a few days, this should bring in more selling pressure, pushing the stock price lower.

Hourly Chart

-          There is a rising 200 SMA (white in color) coming from underneath, this will offer some extra support strength in addition to the minor support level @ $138.74.

-          If the SPY breaks the valley #2 low @ $139.09, it is a confirmed double tops pattern. The first target on the pattern is the gap support level @ $138.1 and the second target is the support #1 @ $134.33.

-          The S&P formed a diamond pattern and it indicates the stock is about to make a move. The pattern can either be a diamond bottom or a continuation diamond depending on the direction of the breakout.

-          (Possible Trade):  long position @ $139.93 from last week is still in play

• Risk: Sell the position when it breaks the previous low @ $139.09; or, if one is willing to put on more risk, he can move the risk level down to the minor support @ $138.74.

• Target: Sell 50% at the breakout level @ $142.39 and run the rest to the 2008’s high @ $143.32.

(15 Minutes Chart)

-          If the diamond pattern breaks to the upside, the pattern is a confirmed diamond bottom. The target on this pattern is the same price level where the stock price started the drop that lead into the pattern. In this case, the start of the move is at $141.26 so the target on the pattern breakout is at $141.26

-          If the diamond pattern breaks to the downside, the pattern is a confirmed continuation diamond. This pattern has the same idea as the 1-2-3 move. The breakdown (3^rd leg) should have the same length as the move that lead into the pattern (1^st leg); that is, the target of the breakdown is $1.88 ($141.28 - $139.4) below the breakdown price.

I hope this post offers you some insight, thank you for reading and please feel free to give me some feedback.