With last week’s rebound, the bulls have taken back control, reports Ricky Wen.
The first week of February played out as a large bull engulf breakout candle that negated all the losses of the final two weeks of January. If you recall, it became a feedback loop; squeeze, daily W-shaped bottom where the bears tried their best to break below the key trending supports but failed miserably. The only thing worth noting is that it was the first time the market closed below the trending 20-day exponential moving average for a couple sessions since the October 2019 acceleration. Other than that, it was the same structure with the higher lows and higher highs.
The main takeaway is last week’s expansion into the new all-time high targets alongside the confirmation of another round of trapped bears with weak hands being shaken out. This week will likely be focused on stabilizing the gains made from last week and seeing if the bull train does the usual "hold half and go" setup by holding above the 50% to 61.8% Fibonacci retracement region at all times.
What’s next?
Friday the E-mini S&P 500 (ES) closed at 3323. This week traders should take advantage of the daily 8-20-day exponential moving average crossover momentum when applicable due to the nature of leveraging the trend/bull train (see chart).
Summing Up Our Game Plan:
- Currently, all dips are deemed buyable
- We must be aware that the last week’s low of 3222 could be the month’s low already just like the previous four months doing the same structure
- Absolutely, no naked shorting is allowed (buying far out-of-the-money lottery puts can be executed if the price is right)
- Reasonable hedging vs highs is fine
- Four-hour white/red line projections are valid when above 3265 and especially when above 3290 due to the structure of last week’s bullish formation and the likelihood of new all-time highs due to the ongoing momentum towards 3345/3350/3367. (Note: two targets have been fulfilled already.)
Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.
