Are You Selling Here? Look At This Chart First

• December 8, 2004
• Derrick Hobbs

 

 

On
Tuesday we saw some healthy selling develop in the mini S&P futures
(ES04Z). However, before you get too bearish for Wednesday, understand these
factors and know when price is truly “breaking down”.

 

First, take a peak at the
November 17 to November 22 correction on the 60 minute chart below. That short
sell off was 21 bars (each bar 60 minutes) and 21.5 points. Now look at the
December 3 high to the December 7 close today. We are at 20 bars and 21.5
points.  This time and price symmetry is very often a good reversal signature
and warning to look for throwing some bids into the market.

 

Second, ES is hitting a
Fibonacci price support zone on this 60 minute chart from 1172-1177. With this
support zone and the time and price symmetry from above, I’m definitely
considering short term trading opportunities on the long side with stops below
the 1172 support zone.

 

 

On the flip side, what if we
get a 60 min bar close below 1172? If that happens, price will fall into an Air
Pocket, which means there is no price support in the form of Fibonacci levels
that will hold price up. In this event, price falls to the next support zone,
which is 1155-1160.

 

Oh by the way, the top on
December 3 at 1198.50 was marked with the printing of a Bearish Butterfly
pattern, highlighted in red (that we commonly refer to in columns and my
analysis).

 

Derrik