Overview

SP 500 FUTURES continued the strong rebound from the recent low 4030. In 2 days, it has risen 145 points from 4030 to 4176, or 3.6% The buying power was indeed in full force. 4164 / 4176 was expected to be a resistance zone where SP 500 Futures bulls must reclaim in order to retest 4200 and above. To determine the trend, support and resistance, I like to use the Renko chart technical analysis and patterns for today’s analysis.

• The Renko chart uses a traditional 6-point brick size.
• On the upside, 4164 / 4176 is the current resistance zone.
• If 4176 becomes a support level and holds, the next resistance is 4200 / 4230
• On the downside, 4128 / 4110 is the next support zone.
• Psychological barriers: 4100 / 4000

What Happened

SP 500 Futures continued the rebound from 4030. During the overnight sessions, SP 500 consolidated in a narrow range around 4128. After the U.S. market opened, it broke above 4128 and resumed its upward path. It closed right at 4176, the expected resistance level.

What’s Next

• On the upside, 4164 / 4176 is the current resistance zone for SP 500 FUTURES. The next resistance level will be 4200 / 4230.
• On the downside, 4128 / 4110 is the first support area.
• 4000 is more likely a psychological support.

Below is the daily Renko chart

How to Use Renko Chart Technical Analysis in Trading – Use Support, Resistance, and Trendline

One great thing about the Renko chart technical analysis is it removes the emotions and noises from the chart. It, in turn, allows us to focus on the price movement, pattern, trend, support and resistance. In essence, let the chart tells the story.

In today’s Renko chart, SP 500 is currently right in the resistance zone – 4164 / 4176. This area could be interesting because a lot of actions have taken place in this area. If 4176 becomes the support level and holds, the SP 500 FUTURES can push higher and retest 4200 / 4230. The long term uptrend is still intact. That is the trendline which connects the prior two lows, 3246 and 3756.

I currently don’t have a position in the market. The current correction pattern began at the high 4230. If the pattern is indeed an A-B-C pattern, it won’t be a downtrend; therefore, it will push SP 500 Futures higher eventually.

On the other hand, if it is a beginning of a major downtrend pattern, i.e. a 5-wave downtrend, the current wave up could be a dead cat bounce. It means we are currently in the 2nd wave; therefore, lower prices are expected. Whether it is an A-B-C pattern, or a downtrend pattern, I think SP 500 is currently bouncing back from the recent low, and will move lower in the short term once a lower high is established. The lower high could be 4176 or 4200.

As a result, I am looking to initiate a buy-write strategy – purchase SDS ETF, ProShares UltraShort S&P 500, and write covered calls.