Yesterday was a particularly interesting day of trading, as the bulls really ramped the market up through some key resistance levels, scoring a trading breakout. In short, stops were busted and shorts covered, “squeezing” the stock market higher).
I want to share with you what I perceived as the initial ‘why’ that forced the chart into trending form yesterday on a short-term basis.
Certainly there are other forces at play, but this one is clear and last week Thursday’s oil movement did the same thing.
Below I have drawn two horizontal channel lines to highlight the trading breakout on the S&P 500 futures chart. Note that the fibonacci zones offer us great upper targets.
With a range clearly present and lots of traders ready to play it, the balance was tipped when price breached and held above resistance. The stops put in place began to squeeze the price action and price headed upward. Some of the strongest price actions upward come when many traders are leaning the wrong way (i.e. on the wrong side of the motion) and thus stops get hit and price is driven higher. This is my supposition for how (and why) yesterday played out the way it did.
As well, the range break saw traditional ‘breakout range’ trading strategies come into play after a higher low presented itself rather quickly. It is for this reason that I always say that traders need to watch for higher lows to develop. This is where buyers begin to cluster and they alert you to a shift in trading momentum.
S&P 500 Futures (ES_F) Â – 2 Hour Trading Chart
Thanks for reading.
Twitter:Â Â @AnneMarieTrades
The author trades stock market futures every day and may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
