The E-Mini S&P 500 futures contract has been range-bound the last three weeks and could be ready to pop. Price has coiled significantly, forming a rare pattern in the process – one that forecasts a major breakout ahead! Check it out..
The Double Inside Bar Pattern
The daily chart shows the ES has formed a rare Double Inside Bar (DIB) pattern, which can typically lead to major breakout opportunities. The resulting moves can last up to a week long…or more.
The pattern forms when the current day’s price range is inside the price range from the prior session AND the prior day’s price range is inside the range from two sessions ago, thus creating a three-bar pattern.
Interestingly, you’ll notice the three-bar daily formation usually reveals a triangle or wedge pattern if you drill down to a lower timeframe, like in the 15-minute chart below. In essence, price is coiling like a spring and is ready to explode.
The Game Plan
Initially, you’ll want to watch for a breakout from yesterday’s price range (1311.50 to 1325.00) for confirmation of direction. If price opens beyond the prior day’s price range via a gap, we could see a unidirectional trend day that lasts the entire session.
For swing trades, if price closes the session in the direction of the break, we could see a 3- to 5-day move in the same direction – one that could be quite spectacular.
Confirmation is everything. While this pattern indicates a major breakout opportunity, price has traded in a very sleepy manner lately…which means this setup could be a tease.
Either way, it’s best to be prepared and have our action levels ready to go.
P.S. Don’t forget! Tomorrow is rollover day!
Cheers!
Frank Ochoa
PivotBoss.com
Follow Frank on Twitter: http://twitter.com/PivotBoss
