Focus on Just the Rallies

07/25/2014 6:00 am EST


Corey Rosenbloom

Founder and President, Afraid to Trade

By focusing on just the recent rallies, technician Corey Rosenbloom of notices that an interesting pattern emerges that demands traders' attentions.

What does price reveal if we focus on just the recent rallies?  A stealth bullish repeating pattern emerges that demands our attention.

Let's focus just on the spike-rally impulse phases in the S&P 500 recently:

Click to Enlarge

I've purposely eliminated the sell-swings from mid-June to present on the S&P 500 30 min chart.

We can thus compare only the rally swings (impulses) and focus our attention on something compelling.

Notice that each green highlight represents a strong intervention force of buying pressure at the start (or in the case of July 1 and 14,in the middle) of a non-stop bullish impulse.

Just like last Thursday's price action drew a number of bears (short sellers) into the market, last Friday's intervention and bullish surge turned the bears into bulls, at least, in the sense that they were forced quickly to buyback, instantly losing positions with their stop-losses that triggered.

Compare each green highlight with the outcome of a straight-up, similar angled, market impulse.

These are created, in part, by buyers buying, but also by sellers buying to cover losing positions.

Here's a closer look at the price action without any highlights:

Click to Enlarge

As traders, we look for patterns in price and compare recent events to discover these patterns,and then exploit them when a similar pattern occurs in real time (like last Friday morning).

Sometimes it's simple patterns that overrule complex analysis, especially if complex analysis keeps us protected on the sideline or worse, short selling a market that has so much hidden bullish pressure supporting it.

By Corey Rosenbloom, CMT, Trader and Blogger,

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