At 235, the SPY rejected the 62 fibonacci retracement of its recent (approx one month) trading range. Additional to this fib resistance was significant price resistance at SPY 92. Thirdly, The Demarker (lowest pane) indicated an overbought condition. The 236 bar completed a bearish 3 bar pattern on the 1 minute chart. I went long the SKF on the 237 bar. My exit target was SPY 91 (SPY price resistance/just above Monday's low). This targest was achieved four bars later.
The last month or so, I have been trading the SPY and SKF in tandem this way.
What I look for in this set-up:
1. The SPY must be hitting at least TWO significant forms of resistance (a fib line, a moving average, price resistance, yesterday's high/low, opening range high/low, etc)
2. On the 1min chart, the SPY must print a bearish candle configuration adjacent to the resistance (bearish engulfing, doji reversal, offsetting inverted hammers, piercing pattern, etc)
3. The Demarker must indicate an overbought condition on the SPY 1min chart.
My SKF exit target is typically the nearest form of price resistance (typically a fib line or yesterday's high/low, etc)
Because of the manic price action, I don't usually use stops when trading the SKF (an added risk in trading this ETF)
But if the bid on the SPY starts to print above the resistance level that I entered against, I get the hell out of the trade.
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