The S&P 500 (ES) has rallied lately, but it is now hitting a key level of resistance that we need to be aware of.
The bulls have been testing that level during the past few trading sessions and are slightly above it right now.
However, this is a known level of U-turn, and we are expecting the ES to turn lower from here.
Disappointing earnings reports from some of the large-cap tech stocks that are included in the index certainty aren’t helping this week either.
Anticipating a Breakdown
In the daily chart of the ES below, you can see that the market is hitting a known level of U-turn at the short term down trend line…
And here’s how the stock is setting up on the hourly chart…
The ES one hour time frame is in a short term up channel.
The larger time frame shows that the sellers can bring the market down, breaking the short term one hour time frame up channel.
It will be a good idea to wait for the one hour time frame to enter into the sell zone, below the up channel, before looking for selling ideas.
Entry: Counter trend line break bearish below the up channel.
Stop: In the buy zone above the entry.
Once or if the market provides the one hour entry, and as long as the market stays in the sell zone below the up channel, it will be a good idea to turn to the five minute time frame and look for Tunnel Trader short / Destination Trader short / Chandelier Trader short ideas towards the one hour price target.
The Bottom Line
There are multiple ways to trade the futures, stock and other markets. We can trade the indexes, both up and down, as well as individual stocks.
But if you want more guidance on the energy market in particular, my colleague and energy sector expert Anthony Speciale is who you need to check out.
To learn more, check out the important P.S. below…
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Keep on trading,
P.S. My colleague and energy expert Anthony Speciale continues to show the way to profits from the petrol patch…