A Fat-Pitch Trade in the S&P 500

This morning following the April U.S. employment report we entered a long SPY trade which was shared in real time in the Trading Lab over at CEO.CA. This was a trade we had been stalking for a couple of days and the weaker than expected employment report offered the catalyst to trigger the trade.

The setup was based upon an area of confluence near ~$204 on the SPY which included:

  • The first touch of the rising 50-day moving average since the rally began in February
  • The lower 2-standard deviation Bollinger Band
  • Support from early April
  • Test of 38.2% Fibonacci fan

The fact that the pullback from the April high has occurred on relatively low volume and lower range days added to the attractiveness of this setup.

 

SPY_long_setup

As it turned out after chopping around in the $204s for the first few hours of trading the bulls gained the upper hand and equities turned green with the SPY forming a bullish engulfing candlestick. We entered our long position in pre-market trading and we are following this trade with a trailing stop.

SPY_trade

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