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05/19/2021 |

$SPY Weekly Candle Case Study: Fibonacci Levels, Trendlines, and Seasonality

There is no need to rely only on sight to navigate the skies when one has the most advanced indicators, tools, and instruments in the cockpit. The latest scanners, alerts, and updates on environmental conditions allow one to focus on the most important tasks. Ironically, this is what trading on TrendSpider is all about; providing advanced automated tools to traders to remove human error and the grunt work from the charting equation, so that focus can be placed on the most important tasks at hand. 

In this week’s case study, we will examine how using TrendSpider’s advanced automated tools helped to remove the cloud cover from the weekly chart for the $SPY.

$SPY Weekly Candle

$SPY chart.

This is a weekly chart of the SPY (S&P 500 ETF) since September of 2020. This chart includes a Fibonacci measured move, diagonal trendline resistance, as well as “week of the year” seasonality. This case study focuses on how you can use technical analysis in the stock market and pair it with traditionally non-technical variables such as historical seasonality looking at win rates of individual weeks of the year.

  1. This number shows the Fibonacci measured move from the August 2020 highs to the September 2020 lows. This measured move was one of the biggest pullbacks in 2020 and is when the market “reset” before hitting new highs into the end of the year. All measured moves for Fibonacci retracements and extensions start from an important high and low in the market.
  2. This number shows the 2.618 extension from the August-September 2020 measured move. These .618 extensions are very powerful because they become self-fulfilling prophecies in the market as many traders use Fibonacci levels in their analysis. As you can see, in early May, the price moved right up to this point.
  3. This number shows the trendline resistance (red line) that starts from the August 2020 highs and is connected to the second week of April’s weekly candle high. This ends up being resistance multiple weeks in a row as the price started to “ride up” along this line. Notice what happens when the trendline and 2.618 level intersect, a large price drop followed the next week.
  4. This number shows the historical seasonality over the last 5 years for the SPY. This is looking at “win rates” which simply means how often did a week close higher than the previous week. As you can see here, as the weekly candle moved up to the 2.618 extension and resistance trendline, we entered the 20th week of the year which has a 0%-win rate over the last 5 years. In other words, the 20th week of the year has closed red vs. the 19th week of the year 100% of the time since 2016. This is a very extreme statistic and lined up perfectly with the weekly candle hitting these two crucial technical resistance points on the chart.

In this case study, we hope to have impressed upon the idea that convergences are very powerful signals that can lead to highly profitable trades. However, being able to capitalize on them becomes more difficult when “flying blind” under the limitations of “free” charting platforms. This is where TrendSpider with its’ suite of automated tools distinguishes itself from the rest. With a click of a button, Fibonacci retracement levels and trendlines are drawn automatically with precision. No need to wonder if you are plotting from the correct point or not with TrendSpider’s Auto Trendlines and Customizable Fibonaccis Drawing Tools. Yet, the manual option is made available for you to take control over and use.

Why not take TrendSpider on a spin with a free 7-day trial and see how much our automated tools can do for you?