Spike Trade Example

This morning on the jobs report the S&P 500 futures spike in the premarket to a new All Time High but quickly shot back down. This triggers my indicator and an alert withing Tradingview to come check the price action and yields a potential trading opportunity.

The risk is defined by the + at the top of the spike. Fundamentally, if the market makes a new ATH the trade is wrong and should be exited.

If this volatility spike reveals a top then the trade should hold and the lower + represents a 3-to-1 reward-to-risk target from the entry on a pullback to the red median line. These + indicators are tools for defining the risk and reward of the trading opportunity.

Technical Analysis would give potential Retracement Levels. The first Retracement Level at 4505 happens to yield the desired 3-to-1 target as indicated. The longer term Retracement Level at 4450 could be a more ambitious target for more reward or to allow a partial position to continue after reaching the first target.