ATM Trading Club Newsletter 

Monday, May 20, 2024

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Graveyard Doji: Indecision Persists on the SPX

-The closing candle for today's session formed a graveyard doji, signaling ongoing indecision on the SPX. However, a sell-off in the VIX suggests possible bullish activity for tomorrow's session, as the SPX continues to hold at all-time high levels. As noted in yesterday's newsletter, the market dynamics remain largely unchanged:

- ChiOsc Accumulation: Accumulation continues on the Chaikin Oscillator (ChiOsc).

- Bollinger Bands: Bollinger Bands continue to point higher, providing room for price movement.

- MACD and ADX Indicators: Both MACD and ADX indicate that bulls remain in control.

Stay tuned for more insights and prepare for potential market movements tomorrow.

The ATM Trading Club Team

On the 1-hour timeframe, we are still trading within the range between the yellow lines. We are also forming a double top formation, which we briefly broke with a long wick, but there was no continuation of the formation.

On the 5-minute timeframe, we have several buy supports at the green lines where large volume spikes have occurred. These buy limits are supported by the order book on the Level 4 platform.

Besides the double top, we also have two bullish formations to consider on the 15-minute timeframe. The first is the right shoulder of a possible inverse head and shoulders pattern, and the second is the handle of a cup and handle formation. Combined with the recent sell-off in the VIX at the close, this points to a more probable bullish outcome in Tuesday's session.

Levels of support….

MA(5) 5292.67

EMA(9) 5256.63

0dte Options to consider for Tuesday…..

Put Vertical to Consider for Tuesday

A Put Vertical spread to consider for Tuesday involves buying the handle if 5305 holds and is able to maintain above 5315. Strikes to look for would be:

- Aggressive Trade: Psychological support at 5300/5295.

- Conservative Trade: More conservative strikes at 5295/5290.

These levels provide potential entry points based on market conditions and risk tolerance.

 Call Vertical to Consider for Tuesday

For a 0DTE (zero days to expiration) call vertical spread on Tuesday, consider the following setups based on price action and indicators:

- Rejection of 5315: If there is a rejection at the 5315 level and the MACD on the 5-minute timeframe is decreasing, with the price maintaining below 5300 and trading within a range of 5300 to 5290, then:

- Aggressive Trade: Sell the 5220/5225 call vertical.

- Conservative Trade: Sell the 5330/5335 call vertical.

These trades take advantage of potential downward or range-bound movement in the market, depending on price action and MACD signals.

Educational Section: Understanding the Gravestone Doji

A gravestone doji is a Japanese candlestick pattern that signals a potential bearish reversal. It resembles an inverted T, with a long upper shadow and open and close prices at the same level or very close. This pattern indicates a possible downtrend in the security's price.

Traders may use the gravestone doji to:

- Forecast possible trend reversals

- Validate current trends

- Consider selling or shorting an asset

The gravestone doji is most significant after an uptrend, especially when preceded by bullish candlesticks. The strongest signals occur with higher-than-average volume or longer-than-average shadows (wicks). For increased accuracy, combine the gravestone doji with other technical analysis or indicators.