The Doji Close.....

ATM Trading Club Newsletter

Monday, May 20, 2024

- Dragonfly Doji Signals Indecision: Will Monday's Session Break Higher?

Beginning with the daily chart, we observe a dragonfly doji candle, indicating market indecision. Despite this, there are positive signs suggesting potential upward movement:

- ChiOsc Accumulation: The Chaikin Oscillator (ChiOsc) continues to show accumulation, indicating sustained buying interest.

- Bollinger Bands Expansion: The recent sessions have led to the Bollinger Bands expanding upwards, providing room for the price to move higher in Monday's session.

- Support at Upper Keltner Band: We have found support at the upper Keltner Bands, currently at 5279.40, reinforcing a bullish outlook.

- Potential Run to R2 Pivot: A run towards the R2 pivot at 5394.79 is very likely this week.

- Momentum and ADX Strength: The histogram shows strong momentum, and the ADX indicates that buyers remain in control.

-

 Things to Watch Out For

On the 1-hour timeframe, keep an eye on these critical levels and formations:

- Gap Fill at 5240 SPX: Be aware of the potential for a gap fill at 5240 SPX, which represents unfinished business that may need addressing.

- Bollinger Band Squeeze: We are seeing a Bollinger Band Squeeze between 5290 and 5320. This compression typically precedes a breakout or breakdown.

- Breakout and Sell-Off Levels: Key levels to watch for breakout momentum are above 5325.50, and for a sell-off, below 5275. Keep these levels handy for Monday's session.

Options to Consider for Monday

• Breakout Strategy:

  • Level to Watch: Breakout at 5306.

  • Indicators: MACD rising and ChiOsc increasing.

  • Strategy: Consider a Put Credit Spread (PCS) within the 5295/5300 levels depending on premium.

  • Aggressive Approach: A more aggressive PCS could be 5305/5300 with tight risk management.

• Breakdown Strategy:

  • Level to Watch: Failure to break out at 5306.

  • Strategy: Consider a Call Credit Spread (CCS) around the 5310/5315 levels, depending on premium.

  • Risk Management: Carefully manage and monitor these trades as levels are tested or become failures.

Stay tuned and vigilant as we navigate this exciting market environment. Manage your risk carefully, and monitor the discussed levels closely to capitalize on potential opportunities.

Thank you for reading, and we hope you find these insights valuable.

Happy Trading!

 Educational Section: Understanding the Dragonfly Doji

A dragonfly doji is a candlestick pattern that can indicate a potential price reversal, usually at the bottom of a downtrend. It's characterized by a T-shaped candlestick with no top tail and only a long lower tail. The pattern forms when the open, high, and closing prices are very close, while the low of the period is significantly lower than the former three.

This formation suggests that while sellers drove prices lower during the trading period, buyers regained control by the close, signaling a potential shift in market sentiment. Traders often look for a dragonfly doji to anticipate a reversal in price direction.