The monthly chart shows that SPY is holding a strong support of 419. On the chart, you can see this month’s strong ongoing pullback from 450 and a hold of that pullback in the support 419-429 zone. Only a break below 419 will tend to invalidate the upside extension in the measured fifth wave long-term and short-term.
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The Weekly SPY chart reveals the ongoing wedge flag formed just beneath a strong resistance 456. A break below 419 is required to invalidate the upside extension and deny the fifth wave continuation higher, and we can experience a lot of swings as we move forward in the next week. It is advisable to position yourself in just one trade direction and not to try to catch every swing.
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As the famous trader says…
“The core problem, however, is the need to fit markets into a style of trading rather than finding ways to trade that fit with market behavior.”Brett Steenbarger
How to trade this?
It is a fact that a strong upside support for Q4 is 419. If we get a confirmed bounce from here and a break above the 440 we could see another test of 460. Near-term, long-trade entries have a higher probability of success. We can open the long trade here with a bit of risk and stop the loss below 419. You can trade this price action with the options as well.
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