Range-bound Price Action Awaiting Resolution

April 16, 2020

Wednesday's session played out as a range day.  Most of the downside action occurred during Tuesday night, and Wednesday’s regular trading hours were spent bouncing from our key support zone in the 2750 area back to the middle of the range towards 2785/2800 on the Emini S&P 500 (ES). As we demonstrated in real-time in our ES Trading Room at ElliottWaveTrader, it was just a textbook feedback loop squeeze setup given that bears/sellers kept failing to breakdown below our key 2750's support.

The main takeaway remains the same:  Price action is still battling between our 4-hour white line and red line price projections. Price action is inside a range of 2840-2750 for the time being and trapping both sides, so traders need to be more patient in this area and wait for additional clues/edges.

What’s next?

Wednesday closed at 2768.75 on the ES, around the range low support of the session after "stick-saving" at the 2750 area. As you can see on the daily chart, price action is still grinding up in an accelerated manner via the daily 8EMA. This is important because the bears have tried to breakdown twice now during this week and have no decisive follow through, so we are  aware of high-level consolidation/bull flag potential.

Highlights from our game plan:     

  • For scalping purposes, need to wait for intraday edges/clues to formulate because price action is smack dab in the middle of the 2840-2750 range. As of writing, price is hovering at 2790s which is the midpoint, so it is trapping both bulls+bears and frustrating traders to throw in the towel.

  • 4-hour white line price projection is primary thesis (see accompanying charts), and red line is alternative as the price action is still battling between both hypotheses. Ignore the dates on the bottom of the chart.

  • For now, when price action below 2845, we can effectively treat all setups below 2845 as a lower high formation until further notice. 2752 remains key support as demonstrated yesterday. Subject to change, if we see price action gearing towards 2850+, which is our red line projection.

  • If you recall from our prior analysis, the first clue or confirmation of a turnaround/temporary top would be breaking below 2750 followed by an immediate breakdown below 2700 key level, which is also the low zone of the past 3-4 sessions.

  • Intermediate bias of 200-500 pts downside from 2840s, and maximum upside 100-150 points.

  • Zooming out, continue to watch daily closing prints 2316.75 vs 2650 battleground given the current situation of the market backtest against the Dec 2018 lows (March 20+23 closed below 2316.75, then from March 24-April 9th closed back above 2316.75…confirming the temporary bottom setup in development.

  • There’s some real panic in the global markets and it is greatly appreciated because we’ve been lacking that extra juice in the first week of March as it was relatively easy or a bit too calm like we demonstrated in real-time

  • We’ve been fully prepared with lots of cash on hand to re-deploy into long term investment accounts in case the shit hits the fan and It looks like we may get our wish for fire sales across the globe.

See chart reviews and projections on the S&P 500.

Ricky Wen is an analyst at ElliottWaveTrader.net, where he hosts the ES Trade Alerts premium subscription service.

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