A symmetrical triangle consolidation had been forming on the intraday frame on the S&P 500 (and other markets), but this morning, we got a nice breakout of the triangle and test of the prior high.
Now, we have a “Go or No Go” on the breakout (meaning - “Is it a bull trap or for real”) which will be confirmed with a break to new highs… but let’s see the current structure and levels to watch.
I mentioned in last night’s Idealized Trades report - in the ‘forecasting tomorrow’ section - about the dominant short-term symmetrical triangle pattern, how we should be expecting a breakout forming as price neared the apex, or point where the trendlines converge.
We actually got the breakout this morning, which sent price surging to test the prior high at the $118.00 level (slightly exceeding it before pulling back, as of 10:45am EST).
We would strongly expect further upside potential if bulls can push price back above $118.20, which would trigger another round of “Popped Stops” (a short-squeeze rally as short-sellers buy to cover).
On the other hand, the pattern would fail and likely devolve into a ‘bull trap’ on a price decline back under the upper trendline at $117.45.
Let’s take a moment to zoom in on a price purism look at the triangle formation and breakout so far:
The trendline boundaries rest near the $117.45 level to the upside and the $116.80 level to the downside, though price broke out slightly earlier than expected in the pattern.
See my brief Educational Page on Triangle Patterns for more information on this relatively common price pattern.
Remember that Friday is a market holiday though the “Jobs Report” will be released, which is usually a market mover. It should be interesting to say the least!
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
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