ES moved up in overnight trading and opened near the recent high, then bumped along in a trading range before briefly making a new day-session high for this rally before quickly falling back to close near the low of the day. The price action prompts an obvious question: will the rally from 1037 end soon?
ES is forming a rising wedge pattern (thin red lines) on the daily chart. In overnight trading the price reached — and stopped — near the January high. So far the market has never been able to reach that high in the regular trading session, which suggests a hidden bearish resistance level. And upside momentum has diminished since Friday.
Today ES could pull back to retest several major support lines (9, 20, 40ema) that lie below this level. So far we expect 1118.00 -15.50 to be the maximum retracement if there is a pull back today. But a move below the 1100 line in September and close below it would indicate that the rally is ended.
Trading strategy for Sept 28, 2010
ESZ0 Intraday chart – 60-minute bars
On the 60min chart, ES made triple tops around 1144-45 range. Today 1137 is key line. A move under it during the overnight trading will be slightly bearish. The price could dip into 1132-33 range or lower to 1120.50 to fill the Sept 23 gap if ES breaks down 1127.25-26.50 range.
After filling the gap 1120.50, it would be very bearish if the following bounce stops under the 1129.50 line. It would indicate that the consolidation range breakout of the past 5 days could be a fake.
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