VIDEO: Live Price Action Trade Analysis on S&P 500 Index

Hi Traders, it’s Nial Fuller here from learntotradethemarket.com and welcome to another trade setups video. Today, I’ll be talking about the price action on the S&P500 daily chart, that’s the U.S. stock market index. I’ve spotted what I think is a good trading opportunity to go long and I’m going to go over the analysis behind the trade setup just to help you guys get a little more of an understanding of how I do things and how I come up with my trading decisions.

I only use price action analysis, that is a naked price chart, a clean chart with a white background and black & white bars / candlesticks and horizontal levels. I don’t use any indicators or anything ‘fancy’. Now, let’s get into the trade setup…

First thing to note on this chart is that over the last year we’ve really had a sideways pattern, it was only until August of this year that we decided to have a break down out of this long-term consolidation. Price broke down all the way back to this long-term support from October of 2014, almost tested it exactly and then rallied all the way back up into this resistance area. You can see, it was support here, on numerous occasions and then on the bounce we held there and it acted as resistance.

Obviously, with basic technical analysis we know that previous support becomes new resistance. So, the market was holding around that 2,000 level and then we sold-off again. But, we didn’t end up testing that recent low or break through it, instead, the bulls came back in and pushed the market straight up back through that resistance, and we are now in a new leg higher. So, the bias as the way I see it, is to the upside and we want to be trading longs, buying the market.

Now, there isn’t a lot of price action evidence to get me into the market now, but what we are doing here is analyzing the overall picture and then we are going to anticipate the next trade.

We can see here the market is edging up against that 2060 level and that’s a level we had identified previously, the line is still on the chart after we zoomed in. When we zoom out we can place the levels and when we zoom in those levels are still relevant.

There’s also another level at 2,011, you can see the market found resistance there and then retraced and then moved back up to that area, had a little pause and then broke through it and then price held it again on a downward retrace to it. So, this area here at 2,0111 is also very significant in the short-term. So, the way I see it is if the market can hold above 2,011, we are poised for more upside.

Now, what I’m going to do is anticipate a trade – however, we don’t have a signal that I would put money behind yet and we aren’t really at a level where we can define our risk correctly. So, what I will do is wait patiently for the market to rotate back down toward that 2,011 level.

However, we might only get a pull back to that 2030 level, which is also a very key level. I’ll be waiting for evidence to get me long via price action signal and that might come n the way of a pin bar, fakey an inside bar or false break. If we see any of those signals in between 2011 – 2034, I’ll be looking to get set long and riding the market as it breaks to fresh highs. Now, that might take up to two weeks to happen, we might actually pop up first and then come back down. But, the idea is that we have identified that the market is generally trending up and we will wait for a pull back and we should eventually see the market continue in the same direction.

Now, just a quick word on how to place a stop loss – I think the logical stop placement on this would be below this swing here and better yet, below 1980 which is well below this swing low there. So, if we were to wait for the market to pull back and get a confirmation signal, we could wait to enter in this area here and have our stop below here and target the recent thighs around 2100, in this region here. This would represent a 3 to 1 risk reward.

As the price action unfolds from here we will update members in the daily trade setups video. Until then, take care and good trading.