The chart pattern du jour is the Inside Day, which could make for an exciting beginning to October (and Q4 of 2012!). Here’s more…
Inside Day
The daily chart of the E-Mini S&P 500 (ESZ2) shows a clear Inside Day pattern has developed. The Inside Day pattern occurs when the range of the most recent day falls completely within the range from two days ago.
That is, Friday’s price range fell completely within the price range from Thursday’s market, thereby creating a potentially explosive Inside Day pattern.
Traders love the Inside Day pattern because it is easy to spot, it’s development indicates pent-up energy, it tends to lead to big moves, and…it works.
A breakout from the two-day range in the ES could spark a huge move in today’s market.
Inside Value
A complementary pattern to the Inside Day formation is the Inside Value setup. The Inside Value pattern develops when the upcoming day’s value area falls inside the value area from the prior session.
That is, Monday’s value area, as predicted by a Developing Value Area indicator, falls inside the value area from Friday’s market.
The 15-minute chart shows the ES has clearly formed this pattern, which has explosive tendencies similar to the Inside Day formation.
Look for a breakout from this pattern to spark a potential Trend Day ahead, especially if price breaks free from Friday’s price range.
Narrow Price Range
The recent 3-day price range of the ES also points to potential range expansion ahead. The average 3-day price range has only been 26.50 points, but the current 3-day range is an even slimmer 20.50 points.
Narrow range days typically lead to range expansion, and the current meager 3-day range hints at a breakout move that spark multiple days of expansion ahead.
Watch Friday’s price range a breakout in either direction, which could set the tone for October.
October Book Offer!
Buy my book Secrets of a Pivot Boss from the PivotBoss Shop in October and receive a free live education webinar in November!
The free webinar will be educational in nature, and I’m sure you’ll love it!
Go to http://shop.pivotboss.com to buy the book for 30% off, or visit http://pivotboss.com/secrets-of-a-pivot-boss to read more!
Cheers!
Frank Ochoa
PivotBoss | Own the Market
Follow us on Twitter: http://twitter.com/PivotBoss
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