S&P 500’s Greatest Hits: I SPY a recurring setup

Painful… boring… low volume…

That’s the only way to describe the small cap world right now.

With the latter being the main descriptor, entries and exits aren’t as easy.

Remember, in trading, you want the easy trade…

Get in and get out.

But while it’s fun trading low float micro cap scams stocks, there’s a certain level of comfort in playing the same setups on a daily basis once you learn them.

The best part? You don’t need an indicator… but they certainly help.

Here’s a pattern that occurs often in the SPDR S&P 500 ETF (SPY):

15-minute to the left, 2-minute to the right… and I’ll tag in the 7-minute throughout the day.

With this setup, there are three or more trades you can take in a matter of 24 hours…

The SPY has a real knack for shaking out folks, but not if you know what to look for.

And I’m going to point out where it happens…

After the plummet, you can see on the far left where the price action “double-bottomed” and put up a short term high.

This is a clue.

However, most traders would jump the gun here to go long only to be stopped out two bars later…

When you see this, look for a strong break above it with a subsequent return to that same exact area.

I’ve marked this with the first blue arrow and highlighted box.

But notice the subtle change in how I’ve drawn the Fibonacci Retracement to mark levels of support and resistance… and entry.

Rather than draw it from the low of day to the peak of the breakout, I measured from the bottom of the breakout candlestick’s body to the peak candlestick’s body.

Why? On the 15 minute chart, I want to look at the meat of the move since I’ll be trading it on a lower time frame such as the 7-minute or 2-minute.

Save the noise for when you zoom in because there will be plenty of it as you can see to the right on the 2-minute chart…

My ideal entry point is going to be at the retest of that short term high I mentioned and just below the 61.8% Fib level that I’m so fond of.

(Rule: It can’t break below the 78.6%.)

After taking entry here, you can wait for it to break back above VWAP (Volume-Weighted Average Price, black dotted line) or enter off of the retracement.

Pick your poison… or scale in…

From here, I’ll typically find my way out little by little until it begins to retest the area from where it initially broke down… In this case, look to the left at the very beginning of the chart.

Short from here.

Now, check out where the price action takes us…

…right back to our first entry.

At the blue arrow, you can hop back in for an end of day scalp.

The SPY has notable and repeating patterns and, statistically, the last hour or so of the session is where most gains are made…

To recap:

Double-bottom. Retest of the false breakout high. Long.

Fail the point of breakdown. Short.

Find support at previous entry. Long.

These are the same exact intraday patterns I trade on the SPY with Chris Hood in TRADECOMMAND.

This rally has traded flat to higher, but when the bias breaks, you can trade the same pattern in reverse.

Give it a shot.