When things are dark, that is the time to pounce.
The markets painted a lot of red last week. We saw a major pullback. Buy the dip is a favor strategy for many people. Pullbacks are buying opportunites.
For traders, volatility is a blessing (as long as you are on the right side of the trade). Watching for bottoms is often a great chance to make a lot of money.
With that said, is the SPY giving up something to play? Is there a trade opening up which can net a few dollars?
Here is the chart.
From the horizontal line I drew, it shows we are in a range of support. If we look all the way back in June, we see that was a to after a prolonged run up. Often, what was previously support becomes resistance.
We also see the last dip at the end of last month was in the same range we are at. This means we have two indicators that could be telling us this is a support area.
The last candle is a potential sign of a reversal. It is a candle that went down and worked it way up throughout the day. The volume was fairly strong on two our of the last 3 days providing another signal that there is a lot of activity.
What could be forming is a double bottom. The lows of last month, coupled with where we are at now, if the SPY moves up, will mean that support held for a second time.
This is a nice set up for a trade. One could go long the SPY using the low of last month as a stop-loss point. A break to the downside could signal a lot more pain for the markets so this is not a "go all in" scenario.
Watch the action at the open to see how strong it is. A nice move up at the open would further validate the bulls being in charge. If not, the last candle is a false reading and the bears are still in control.
As always be careful out there.
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