Technical Analysis and Forecast
The SP 500 FUTURES traded in a narrow range today. Neither the bulls nor the bears wanted to make a move. It was confined between 4180 and 4204. The immediate resistance 4200 needs to be broken in order for the bulls to push the price higher. After 4200, 4230 will be the next target. Based on the Renko chart technical analysis and forecast, things have stayed very much the same since the last update.
- The Renko chart uses a traditional 6-point brick size.
- On the upside, 4200 is the immediate resistance zone.
- Once the SP 500 Futures breaks above 4200 and holds, the next resistance is 4230.
- On the downside, 4176 / 4164 is the strong support zone.
- Psychological barriers: 4100 / 4200
It was an uneventful and a quiet trading day. The SP 500 Futures traded in a 24-point range. It continued to bounce between two key levels – 4176 and 4200. Breaking either level, things will become much more exciting.
- On the upside, 4200 is the immediate resistance zone, followed by the next resistance level, 4230.
- On the downside, 4176 is the first support area, followed by 4128.
Below is the daily Renko chart
How to Use Renko Chart Technical Analysis and Forecast in Trading – Support, Resistance, and Trendline
A Renko chart filters minor price movements and makes it easier for traders to focus on major trends. This is because a Renko chart requires a brick size that shows the minimum level of the price movement. For instance, a stock Renko chart is set to have a $0.50 brick size. A new brick is created in the next column once the price has passed the bottom or top of the initial brick by the brick size.
To continue with the example, the stock is trading at $50, and the brick size is set at $0.50. A new brick will only be created once the price closes at $50.50. When the price goes up from $50 and closes at $51, two bricks will be created. Only 1 brick will be created if the price closes at $50.74. That is because each brick needs to be $0.50 in size. If the price only goes up from $50 to $50.49, no new brick will be created.
Unlike the bar or candlestick charts, the time element is not essential and consistent in a Renko chart. It might take one brick hours or days to form, while other bricks may form hourly or daily. This is different from candlesticks. New candles are always created at set time intervals.
Based on the rules and characteristics above, it is highly effective to detect trends, resistance and support levels on a Renko chart because there is less noise on the chart.
In today’s Renko chart, the SP 500 Futures created no new bricks on the chart. The last brick was 4182 – 4188. 4164 / 4176 has become the strong support zone. The resistance area is 4200 and 4230. Typically, I’d like to see 2 red (down) bricks before taking a short position. Since the low of the last brick was 4182, 2 red bricks will take the price down to 4170 (4182 – 12 = 4170). Remember I use the traditional brick size of 6. However, 4170 falls right in the strong support zone. It’s not a good idea to initiate a short position at the support level.