Trading Idea of week 35 - S&P500 - TradingMasteryHubWelcome to the TradingMasteryHub Trading Ideas!
Are you ready to gear up for the upcoming week? Join us as we dive into a detailed analysis to uncover top trading opportunities that could potentially boost your trading account. We’ll break down our strategy, defining precise Entries, managing Risk, and pinpointing the optimal Exit zones—steps that can transform your trading performance. Whether you’re just starting out or looking to fine-tune your approach, these insights are crafted to help you on your path to mastering the markets.
S&P 500 Poised to Break New All-Time Highs!
The S&P 500 has climbed back above its long-term uptrend (green trend line) that’s been in play since early November 2023. The current all-time high (ATH) of 5,680.4, set on July 16th, also marked the beginning of a mid-term downtrend (red trend line). However, two weeks ago, we witnessed a significant breakout from this downtrend, accompanied by high volume, which also reestablished the long-term uptrend. The last four trading days have been range-bound between key support (green) and resistance (blue) zones, with a stable volume profile (orange box) in between.
If the price manages to break through the key resistance zone (blue), new ATHs are highly likely. This presents a clear and compelling trading opportunity that we’re excited to share with you.
How to Turn This into a 5-Star Setup!
Before we rush into a trade, excited by the prospect of bullish momentum, it’s crucial to do our homework. This means waiting for multiple confirmations before entering the trade:
1. The Trend is Your Friend: The chart shows different trends depending on the time frame. We’re trading on a 15-minute chart, where the uptrend is clear. But we also need to confirm that the higher time frame (above our execution trend) is in an uptrend and not in a consolidation phase following a longer-term downtrend.
- Box Checked: We saw a breakout from the mid-term downtrend on August 15th with high volume (RVOL > 3) and a 15-minute close above the last higher low of that downtrend on August 19th, also with high volume.
2. We Need New Bullish Momentum: To hit new ATHs, we require strong buying pressure. This could come from a catalyst like favorable news (e.g., interest rate cuts by the Fed) or a technical breakout above the key resistance zone (blue).
- Box Checked: We’ll look for a 15-minute close above the blue zone, RVOL > 3 at the breakout, and ideally, a U.S. market opening above the previous day’s Volume Profile high to confirm a trending day.
- Plus: Price must be above both the session VWAP and 2-day VWAP.
- Bonus: An additional catalyst in the form of a market-moving news event.
3. We Need Patience: Only when all the above criteria are met should we enter the trade.
- Entry: After a 15-minute candle closes above the blue zone, but only if the risk/reward ratio is >1.3 up to Target 1.
- Risk Management: Stop Loss (SL) at 5,624.7, just below Friday’s Pivot R1 minus 6 points for market noise. Take Profit (TP) Target 1 is set at 5,678, just below Pivot R2 (also the 1.618 Fib Extension), where we’ll scale out 50% of the position and move the SL to the entry level, making the trade risk-free.
- Profit Target 2 (50%): This will likely be around 5,730, just below the 2.618 Fib Extension. If we don’t see new ATHs, TP Target 2 will be triggered by a close below the highest green 15-minute candle.
4. We Need Discipline: Trading only when all conditions are met will give us an edge in the long run.
- Discipline: Sticking to your rules is crucial for consistent trading. Without discipline, you lose the ability to analyze and refine your edge, leaving you at the mercy of emotional decisions.
5. We Need to Review Our Trades: Keeping a Trading Journal is essential for learning from both mistakes and successes. We’ll provide another e-Learning session focused on this vital topic. A simple journal can significantly improve your trading.
Always Have a Plan B!
Sometimes Plan A doesn’t play out. That’s why it’s important to have a Plan B—a slightly less optimal, but still viable, 4-star setup.
In this case, if the breakout above the blue zone doesn’t occur and the market reverses towards the green zone, we might consider a short trade instead. But again, we need a separate checklist:
1. Range Trades Need a History: The market must test key zones (green and blue) more than twice each to confirm a range.
- Confirmation: More than two touches of the green and red zones have already occurred.
2. We Need Bearish Momentum: A bearish environment is necessary for a return to the range. This could be triggered by a negative catalyst (e.g., lower unemployment rates) or a breakdown below VWAP.
- Box Checked: We need a 15-minute candle close below both session VWAP and 2-day VWAP, RVOL > 3, and the market ranging within the Volume Profile.
3. We Need Patience: Enter the trade only when all conditions are met.
- Entry: After a 15-minute candle closes below both VWAPs, with a risk/reward ratio >1.7 up to TP Target 1.
- Risk Management: SL at 5,647, just above Friday’s Pivot R1 plus 6 points for noise. TP Target 1 at 5,602, just above Pivot P (0.382 Fib retracement), where we’ll close 100% of the position.
4. We Need Discipline: As always, sticking to the plan is key.
5. We Need to Review Our Trades: Keeping track of your trades ensures you learn and improve over time.
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Conclusion and Recommendation
By focusing on clear trends, momentum, and discipline, you can capitalize on high-probability trading setups like the ones we’ve outlined here. However, it's crucial to understand that not every 5-star setup will be a winner. Even the most promising setups don’t guarantee success every time. The true key to long-term profitability lies in consistently following a well-defined strategy and maintaining a favorable risk/reward ratio. Over time, this disciplined approach can lead to steady profits, helping you grow your trading account while minimizing losses.
Having a solid Plan B also keeps you prepared for whatever the market throws your way. With these strategies, you’re not just following the market—you’re mastering it.
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