simplified analysis of markets using heiken ashi charts

SPY_9_12

This weekends post is going to be using Heiken Ashi candlestick charts. I’m not going to describe how they’re different, you can read more about them here. Briefly, they help smooth out price, show trends, and overall paint a cleaner picture. They do this by using a modified (averaged) calculation of determining the high,low,close,open of each bar.

$SPY we had a range breakdown back at the end of August which led to a sell off down to 182. We then proceeded to bounce and retrace roughly 50% of that move over the next couple of weeks. Now we find ourselves moving sideways around the 50% retrace zone sandwiched between 192 and 199 support and resistance.

Briefly: we’re range-bound, within the context of an impulse leg lower lower.

What we’re waiting on is for the market to show us whether or not this sideways chop will turn into a continuation pattern lower, or a push higher back to the original breakdown range of SPY 205.

The 20 period EMA is still above price, which signals to us intermediate term momentum still favors the bears and that resistance levels should be difficult to break out from.

Keep things simple and respect the ranges, we’re in a waiting game, so don’t get impatient.

>>>By the way, I’m holding a webinar in a couple of weeks, sign up free Here!

 

QQQ_9_12

$QQQ a similar situation to the $SPY but do notice where this recent sideways range has developed. We’ve retraced more like 60-70% of the original impulse leg to the downside and notice how pent up price seems to be near last weeks highs. Also note that the 20 period EMA is right along side of current price. These are all signs that the bulls are more eager buying the dip in this index rather than the SPY.

 

USO_9_12

$USO look how clean heiken ashi charts display trends. Oil has recently had a sharp move off of the lows breaking it’s steep downtrend line and is now wrestling with the 20 period EMA. The action over the past two weeks looks constructive as it continues to hold in the top 30% of the recent impulse leg to the upside. But of course that could all change quickly. A breakdown below these recent lows could have us re-testing the August lows in very short order.

It seems like a directional move this coming week is likely. A continuation leg higher towards 16.50 or a breakdown to the lows are the bull & bear scenarios. We’re still long USO with a stop around $14.

 

UNG_9_12

$UNG a few times this week natural gas looked ready to break down to fresh 52 week lows and start a new leg lower. But every time it looked it’s worst, it managed to hang in there and catch a bid. It closed out the week up 1.67% and it’s showing signs like it once again wants to hold these lows around $12.50 and continue higher back into this very prolonged range. I’ll still keep this weeks lows on watch.

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Evan Medeiros

Evan is the founder of the Trade Risk. With 20+ years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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