Capture Trends
 
 
 
 
FUTURES: Broadening wedge on S&P futures PDF Print E-mail
Written by Our Staff Writer   

September 15, 2009: The S&P 500 e-mini futures contract has formed a  broadening wedge on the daily chart--a difficult pattern to trade.

A look at the chart will show that the S&P 500 futures has formed a broadening wedge. After a run up in prices this can usually be bearish formation with prices breaking down. Traders however find it difficult to trade this pattern as prices often break out of resistance and support areas only to reverse direction. A safe bet would be to take positions when prices hit the top and bottom trend lines. Notice that prices have touched the trend lines more than three times, which confirms the pattern.

The price action inside the pattern looks bearish. The bearish bias is based on the fact that volume  is falling despite rising prices. The only time volume spiked was when price fell, which is indicated by the white vertical line on the chart. Also notice the price action itself. The down moves are sharper than the up moves. It only takes a couple of candles for the prices to fall drastically to the bottom trend line, but several candles to retrace up to the top trend line. This shows a weakening bull. 

A close below the lower trend line could indicate the beginning of a sell off. However, close above the upper trend line can show a continuation of the current bullish phase. Remember that these are difficult patterns to trade and sometime prices break a trend line and then move in the opposite direction. 

Chart Analysis

Broadening range on S&P futures 

Support and resistance report

9/16/ 2009: Support and resistance on index futures