Taking a Look at SPY 09/02/2009

I wanted to take show an intraday chart of SPY from 09/02/2009 to take a look at how price reacted at certain levels that I usually watch for.

I typically will keep my eye on pre-market support and resistance levels as potential intraday pivot points which may offer good scalping opportunities on a reversal.

At the same time, a break through these levels may be signaling a breakout. Figuring out which direction to trade at these price levels is the tough part.

Obviously, being on the right side of the trade is much more satisfying, but we cannot be right in every case. Let's take a look at an intraday chart of SPY 09/02/2009 below:

SPY 09/02/2009

To prepare for the opening trading session when 9:30 comes around, take a look at the pre-market trading range. The first thing to do is to look for highs and lows and see if there is any noticeable reversal points. This would indicate buyers and sellers coming in to reverse the price.

Just before 8 a.m. you'll notice a reversal high occurred near $100.17, then a move lower occurred and found support near $99.70. This low also coincided with the prior days low support area.

You'll find that many times once the market opens at 9:30, prices for the first 30-60 minutes will stay between these pre-market levels. In this case, the market opened and immediately moved lower, but only to the pre-market support level, and then started moving higher.

If you look closely, SPY then went higher, reversed and moved lower to test the support level again, and once again moved higher. This second time it spiked up through the upper resistance level, but then quickly moved lower again.

I wanted to show this particular chart today of SPY because what happened was that prices spiked up through resistance, but only as a fakeout, and then quickly reversed. This illustrates the reason to think about having stop losss in place somewhere outside of the support or resistance levels to allow for this type of price action.

Just imagine going short at point 1 expecting a reversal, and then getting stopped out at point 2 and going long, and then getting stopped out again at point 3. Then, you try again going long at point 4, getting stopped out at point 5, going short and then getting stopped out again at point 6. Believe me, it can happen.

There are a few ways to decrease the odds of being stopped out here with a loss. First, instead of going short at point 1, wait for some type of reversal bar back down from the resistance level. Don't just go short as it reaches that price level. Second, use a stop loss that gives you some room for something like this from occurring. This can be learned by looking at various charts from different days to see how price is reacting at key levels, preferably using the same stock/etf that you will be trading.

Using some of these "patience" techniques, the ideal trades would have been going short at point 3, and then going long at point 6, exiting each position prior to opening the next of course.

You can also use the previous days, or several days trend to try and determine the current days projected price movement. In this case, the prior day was a large volume down day, and you may have expected some sort of bounce higher. If this was the case, you may want to wait until the price bounced from the lower support level and only go long this particular day.

Looking closer to try and find a bottom for the day, we can clearly see the 123 Reversal Pattern I have previously written about that occurred shortly after 10:30 a.m. I happened to be watching as it occurred and noticed it forming live. (I didn't make the trade as I was looking for things to write about at the time).

SPY 123 Reversal Pattern Intraday Trading Strategy

The 123 Reversal Pattern is a great Intraday Trading Strategy that occurs on a regular basis. It can be used to find tops and bottoms, and on various time frames, not just Intraday Charts.

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