NVDA once again saved the day

ATM Trading Club Newsletter 

Wednesday, May 22, 2024

The closing candle on today's market was a Hangman. After the release of the minutes, which revealed a hawkish stance from the Feds, the market began to sell off. Additionally, anticipation of NVDA's earnings report at the close contributed to market volatility.

After reaching a support level and hitting the low of the day at 5286.01, which also formed a double bottom, the market began to rally, closing at 5307.01.

Will the Hangman Play Out?

The closing candle on today's market was a Hangman. After the release of the minutes, which revealed a hawkish stance from the Feds, the market began to sell off. Additionally, anticipation of NVDA's earnings report at the close contributed to market volatility.

After reaching a support level and hitting the low of the day at 5286.01, which also formed a double bottom, the market began to rally, closing at 5307.01.

However, will the Hangman play out? Here are some reasons this candle formation might have a hard time living up to its name:

- ChiOsc: The Chaikin Oscillator is still at a good level of accumulation.

- MACD: The MACD is still showing strong momentum.

- ADX: The ADX indicates that buyers are still in control.

These factors may counter the Hangman from playing out fully, suggesting potential resilience in the market.

We also came to a double bottom, where buyers took control and quickly bought the market, closing above 5300.

Levels to watch for Thursday include a breakout above 5310 and a test of the hourly range within which we have been trading for the last couple of days.

0DTE SPX plays to consider for Thursday are as follows:

PUT VERTICAL trades, price action must remain above 5297.50. Aggressive plays to consider would be a 5300/5295 vertical spread, while the conservative play would be 5290/5285.

CALL VERTICAL trades, once again, a failure of 5325/5330. Aggressive plays would be 5335/5340, while a conservative approach would be 5345/5350.

Educational Section: The Hangman Candle

The hangman candle, a single candlestick pattern, indicates that the current momentum may be ending, potentially signaling a change in direction for price action. It serves as a warning sign for traders and can be used to identify a potential short trade, as the long upper shadow suggests selling pressure.

The validity of the hanging man candlestick is confirmed by observing how the price behaves after the candle is formed. If the next candle falls below the low of the hanging man candle, it can serve as a strong signal to enter a short position.

In this candlestick pattern, the color of the candle depends on whether the closing price was higher or lower than the opening price. A black candle signifies a lower closing price, while a white candle indicates a higher closing price.

It's worth noting that there is a bullish counterpart to the hanging man pattern known as the hammer pattern, typically observed after downtrends.

Understanding candlestick patterns like the hangman can provide valuable insights into market sentiment and potential shifts in price direction, aiding traders in making informed trading decisions.