Thursday, May 17, 2007

Closing in on 1527.46

"There are only two options regarding commitment. You're either IN or you're OUT. There's no such thing as life in-between."

Pat Riley


This is the chart of the S&P 500 based on the 3day opening range from the start of the year. 1500.43 passed a test for now and it looks like 1524 is the next target. With the large cap stocks leading the way, this should be attainable. Friday is option expiration, so that could be an area that is drawing a lot of attention. Another number to keep in mind is that 1527.46 is the high weekly close from back in 2000. It is acting like a magnet. Below is the weekly chart showing the weekly closing high.

This concept of the opening range can be seen in Wednesday's S&P futures chart. It is important to draw these lines after you have 3 five minute bars. The chart below shows the opening range marked with black lines, and red and green lines showing the levels above and below the opening range.

The red circle shows the target reached on the down move. The green circle shows a higher low which signaled the possible end of the down move. The market then retraced back to the opening range and broke above, tested the top of the opening range once and then went on to finish at the high of the day. Below is the same chart but with a triangle pattern marked and levels from the system mentioned the past few posts. This system can be reviewed here.

Some areas to watch include the Dow Jones Transportation Index along with the sub-index of the railroads. Below are both charts with their corresponding triangles marked.

Two railroad stocks that have started to move out of their triangle patters are Burlington Northern-BNI and Union Pacific-UNP. Below are charts of both with triangle patterns outlined.

The next post will start to cover how to filter and scan a database of stocks for triangle patters over various time frames.

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