Potential Bullish Butterfly Pattern Setup

22 de mar. de 2017

SPX SPX I see a potential bullish butterfly pattern setup. I feel this setup isn't as strong as the bat pattern that I saw earlier. However, I will still consider it as the ratios align with each other to within about 8 points (see shaded purple ellipse). The shaded purple ellipse represents a Potential Reversal Zone (PRZ) , which gives us an area for entry using one of the options 2315C/2320C/2325C depending on which strike you choose and how far the market goes into the PRZ. In a butterfly pattern, 1.27XA is highly critical. However, there is a potential to cut deeper into the PRZ, with 2315 being the deepest. Anything after that you should consider a stop loss of around 5 points or a percentage based on your personal methodology.

I am thinking that the 1.27XA area has some strong technical importance because there is a small window/gap that occurred there earlier. So I am considering to go long 2325C options if we hit about 2323, which is where the 1.27XA is placed. I forecast that this may occur either on Wednesday, March 22nd or Thursday, March 23rd. My stop loss would likely be around the 2317 area based on this entry idea since the window would be closed at that point and signify a higher level of bearishness. Profit levels would be the usual 0.382/0.50/0.618/etc. If there's a blowout, then you can be a bit more aggressive with profits at 0.618/0.786/etc.

23 de mar. de 2017

Nota

We may need to wait for an additional one or two trading days for this potential idea to play out. So we may be looking at Friday, March 24th or Monday, March 27th.

27 de mar. de 2017

Trade fechado: objetivo atingido

The 2323 target was reached. Closed position when window closed around 2343.

27 de mar. de 2017

Nota

The window I was talking about at 2343 was the previous trading session's final candlestick's low using the 1-minute chart.