Candlestick Analysis of the S&P500 Last Week

Submitted by Marco on 11 May, 2006 - 20:34

Candlestick interpretation of the S&P500 charts

I personally don’t track the S&P500 because I tend to only trade the Australian Stocks as well as forex. Keep in mind this is just an exercise of technical analysis using candlesticks. Last week the S&P closed above [A] an established resistance point as established by existing support resistance theory as well as candlestick theory.

The resistance price was initially set by the shooting star candlestick in the middle of March. A shooting star is a candlestick with a long upper shadow with a small real body at the end of a trending range. The candle can be of either colour and it signals trouble ahead.

In early April we can see the S&P500 index testing the resistance area before bouncing off the resistance and falling. A few days later, the index makes a strong recovery with that big fat green candle. Two days after the surge, the index then tested higher levels and stalling around the resistance area.

Now, the week closed above [A] the resistance area. The market can choose to move three directions. Up, down or sideways. If the market decides to go up, [B] will become the new support set by the previous tested levels by the stalled attempt. If it decides to move sideways, [B] would be the next support line. Finally, if the S&P500 chooses to fall… and if it hits the [C] level, it may indicate that the index could turn into a downtrend. Check your charts.

[Update: 11th May 2006] It's decided to go sideways for the past few days. It seems like the S&P500 is using the top of the bullish candle [A] as a new resistance... It's too early to tell...