Trading plan for May 6, 2015

150505-ES-dailyEven though ES closed near the top of the rectangle pattern on Monday, the volume was lighter than the prior day which indicates that it had no follow-through and makes the high close suspicious. Yesterday (Tuesday) the suspicions were confirmed: ES gapped down on the open and continued to go down to the end after it filled the gap in the morning session.

An ascending triangle pattern (from 2033.50, the April low) has been clearly established on the daily chart. The chances of a break-out or a break-down are about 50-50 for this pattern, and it is not clear which way the market will go. There is typically a lot of “noise” on the intraday chart and we have seen lots of false breakdowns and breakouts. We have to wait patiently for confirmation before we rush into a trade.

A break and close above 2125 on high volume could be sufficient proof that ES intends to go higher to reach its target at 2135-68.75 zone. But if ES moves below 2064.50 and closes below there, it could lead to a further decline toward 2025 or lower to 1985.

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