SPY Bullish reversal survives earnings

2022年10月28日

With (hopefully) the most disappointing earnings reports behind us and depending on the news over the weekend, I'll be ready Monday to look for a move, from bulls or bears, that rebounds off the buy zone of ($386.96 - $389.29). I will note, while I acknowledge the possibility of a bearish move above, the bulls seem to have considerable advantage considering the the general trend formation at the moment.

There was a large inverse head and shoulders pattern that developed on the SPY chart over the past few weeks. Going into earnings I didn't feel the urge to act on it yet, but with big companies having reported, ill be looking to act on this more in the coming weeks. If we break out the math and study our levels: it appears the shoulders formed at $357.09, the head at $348.11, and the neckline at $375.45. This indicates that breaking to the upside yields a mid term technical goal of $402.79. Which just happens to be in the next buy/sell zone. These points seem to be confirmed by the characteristic volume spikes on the left shoulder, and head, while the sellers became noticeably absent about time of the right shoulder allowing bulls to regain control.

This play has a Risk to reward ratio of over 5, with the stop loss being a close under the lower limit of the buy zone : $386.96

As always, good luck to all.