Overview

Renko Chart Technical Analysis

SP 500 FUTURES was once again unable to break above the strong resistance level at 4176 and ended lower for the day. During the overnight sessions, it was confined in a 20-point range. Shortly after the U.S. open, it reached 4184; however, it ran out of steam. From that point on, it gradually traded lower. Nonetheless, the uptrend is still intact. Based on the Renko chart technical analysis:

• The Renko chart uses a traditional 6-point brick size.
• On the upside, 4164 / 4176 is the immediate resistance zone.
• If SP 500 breaks above 4176 and holds, 4176 becomes the support level. The next resistance is 4200 / 4230.
• On the downside, 4128 is the support zone.
• Psychological barriers: 4100 / 4200

What Happened

After the big run up yesterday, it was fairly uneventful today. SP 500 Futures traded in a very narrow range all day. It was confined between 4150 and 4184. The selling pressure started after it was unable to break above the 4176 area. However, the selling was not relentless. It looked more like a profit-taking type of selling. So far, SP 500 Futures is only down 0.55% in May. In comparison, it was up 5.2% in April. It is up 11% year to date.

What’s Next

• On the upside, 4176 is still the immediate resistance zone for SP 500 FUTURES. The next resistance level will be 4200.
• On the downside, 4128 is the first support area.
• If the bulls could give it one more try and push it above 4176, SP 500 Futures might have another chance to challenge 4200 and then 4230.

Below is the daily Renko chart

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

Renko charts filter out small price movements so it is easier for traders to identify and focus on the big picture. The price must move a specified amount to form a Renko brick. I like to use the traditional method, a fixed amount. For the SP 500, I use 6 points. That means the price must move and close at least 6 points away from the last brick in order to create a new brick.

Renko charts can help traders incorporate a trend trading strategy. By identifying the support and resistance areas, as well as the trends, traders can determine where to enter the market and the length of time to hold the positions.

In today’s Renko chart, SP 500 is trading in between 2 important levels, 4176 and 4128. Primarily, it was fluctuating between 4150 and 4184. 4176 was proved to be a very strong resistance. In order for the SP 500 FUTURES to move higher, it needs to break above 4176 and holds. Then, it will be able to retest 4200 and 4230.

If 4176 is too difficult to overcome this time around, it might go back to retest 4128 and see if it could attract more buyers to gain the upward momentum.