S&P 500: Wait for Breakout & Retest of Channel
U.S. markets ended the last trading day of February in the red as investors and traders remained concerned about the Federal Reserve's future policy path. Markets pared gains made in January as strong economic data coupled with a tight labor market raised concerns the central bank may remain on its rate hike path for longer than expected.
Traders have started to price in the chances of a bigger 50 basis-point rate hike in March, although the odds remain low at about 23%, according to Fed fund futures, which suggest rates peaking at 5.4% by September, up from 4.57% now. BofA Global Research cautioned the Fed could even hike interest rates to nearly 6%.
The SPDR S&P 500 ETF Trust (NYSE:SPY) closed 0.37% lower on Tuesday while the Invesco QQQ Trust Series 1 (NASDAQ:QQQ) lost 0.13%.
Federal Reserve Bank of Chicago President Austan Goolsbee reportedly said central bankers must avoid putting too much weight on financial markets and should focus on what they learn from incoming data.
This was Goolsbee's first speech since he took office last month. In his remarks prepared for an event at Ivy Tech Community College in Indiana, Goolsbee it is a danger and a mistake for policymakers to rely too heavily on market reactions.
"Our job is ultimately judged by what happens in the real economy," he said according to a Bloomberg report.
Goolsbee also observed data that bounces around can make it difficult to see what's going on in the economy.
"So, it's important to supplement these traditional data with observations on the ground from the real economy," he said, adding that this is especially true when things are as strange and up in the air as they have been through much of the pandemic times.”
One of the most common patterns of price trend continuation is the Flag pattern. How to identify this pattern? How to use it in trading most effectively?
The Flag pattern is a type of price pattern in bullish trends. This pattern consists of a strong increase (called a flagpole), followed by a countertrend with two levels of resistance and support (called flags). The price forms this pattern after a strong increase. It then breaks out of the resistance and continues rising, marking the end of the pattern. This is a very common behavior of prices during an uptrend.
After breaking out of the resistance, the price can retest this new support. Retest is the process of retesting a price zone that the price has broken before.
The price breaks out of the resistance and rises. Then, it often tends to fall back slightly to retest the recently broken resistance level. Enter a trade at this point could bring the best reward upon uptrend confirmation. However, a stop loss below the new found support would minimise the risk as well.
Trading Tips: Trend is our friend when trading a channel. Be patient and wait for a retest to avoid getting trapped before a breakout. Price should swing between 394 and 398 on Wednesday before a bigger move coming up. Trade safe with a stop loss 😉
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- CynthiaVogt·2023-03-01I'm optimistic about the market's future, but I think it's important to be prepared for any potential changes in the Fed's policy1Report
- JessieTheresa·2023-03-01Thanks. What if the retest failed? Does that mean it won't be this pattern in future? Looks like there is only one breakout1Report
- Trevelyan·2023-03-01Flag pattern seems like a useful tool for identifying price trend continuations.👍1Report
- Dollydolly·2023-03-01market reactions can be misleading sometimes, we should focus on the real economy as well1Report
- RanyRomani·2023-03-01good information2Report
- JuliusGoldsmith·2023-03-01Hope the Fed won't hike interest rates too high and hurt the economy.LikeReport
- henghm·2023-03-02likeLikeReport
- valentia·2023-03-01waiting 😃1Report
- Tenten·2023-03-01OkLikeReport
- hwhw123·2023-03-01kLikeReport
- Ais18castle·2023-03-01ok1Report
- Jyozu·2023-03-01Ok1Report
- jjsh2·2023-03-01Oh1Report
- 虎火·2023-03-01Ok1Report
- HanDynasty·2023-03-01👍2Report
- TxChris·2023-03-01[Smile]1Report
- TAN PS·2023-03-01okLikeReport
- Ha0·2023-03-01okLikeReport
- Milan44·2023-03-01👍1Report
- shaunlohloh·2023-03-01Nice1Report