SPX: Nested Bullish Patterns

(Click On Chart To Enlarge)

From this morning's comment section in the NASDAQ thread:

"The NASDAQ not only got back above the broken trendline, it GAPPED above that trendline, put in a low of 1397, and the session ended up being a "Gap and Go." The Bears who were waiting for a pullback to the trendline to cover, or who kept shorting the rally, got trapped."

We've been discussing "Follow what we SEE, not what we think," which isn't always easy. Especially not easy when we commit to our bulish or bearish predictions. We need to watch to see if anything is telling us that we've got it wrong.


Let's look at the SPX 5 Minute chart:

1. After a big rally off SPX 741, we got the Bullish Falling Wedge (in white)
2. After the Bullish Falling Wedge broke out, it pulled back to the top of the Wedge, at 841, and found support there (white arrow) at Red #4. SPX 841 (Red #4) also became Data Point #4 for a Symmetrical Triangle (pattern in red), within which the Bullish Falling Wedge was nested.
3. The Symmetrical Triangle broke out at about 862.50, which put a measured move of roughly SPX 896 IN PLAY.
4. There's never a guarantee that any target will get MADE, but a breakout of "nested patterns" like this usually has some added strength on a breakout.
5. In the ensuing rally, the yellow up trendline would be fine for a tight stop, if we're concerned about a failure. That trendline held beautifully, as support, and the market closed just above the 896 target that was IN PLAY.