Is "Buy The Dip" Back For SPX? March 26 Plan
One of the amazing things about technical analysis is how often weeks (sometimes months) of price action can be determined by a singular level. This was the case for the 5747-55 zone for the past several months. As discussed at length, 5747-55 was support of a massive 4 month “megaphone pattern” which contained all price action from November.
On March 10th, we broke it down, triggering shorts for a 200 point sell. However, levels like this don’t go unengaged for long and starting on March 13th, I was calling for a back-test of this level and as readers know, I got long on that date in the 5580s (on my core setup, the Failed Breakdown), looking for a rally to 5755. I wrote on March 13th: “We have an active Failed Breakdown. My general lean is we can re-test 5610. If bulls can clear, we can work up the levels to 5636, 5710, then 5755-62.” By last Monday, we got to 5755-62 and last week, we back-tested this 4x.
After this megaphone was softened up with 4 back-tests from below last week, this week it was finally time for a breakout on test #5. I wrote Friday at 4pm: “The pathway here would look something like defend 5699 then work back up to 5745-57. Perhaps 1 final dip there, then breakout. 5782, 5795, 5809, 5824, then 5850 are the targets for the next leg.” On Sunday evening, we tested 5850 for the 5th and final time, dipped, and then, we broke out got paid. By yesterday, we got to 5824 high of day before spending today chopping, and setting up the move to 5850 next.
The recovery of this megaphone was a significant win for bulls and after 4 red weeks in a row, dips are being bought. How much higher can we go? In today’s newsletter I’ll talk this, I’ll do a deep dive into a Failed Breakdown we had on Friday at 5686 which triggered this latest leg up. Specifically, I want to talk about the question I get most asked about Failed Breakdowns “how do I determine what a reclaim is?”. Finally, I’ll discuss the actionable trade plan for tomorrow.