S&P technical analysis: Contrarian bullish spot due to a possible 'double busted' triangle on the weekly timeframe

A double busted pattern is a bearish technical analysis pattern distinguished by two consecutive downward price movements, or "busts," after an initial upward price movement. It is a reversal pattern that shows a change in momentum from bullish to negative.

On the above video, I show an orientation for a trade idea for ES, as follows:

  • Entry: 4013.50
  • Stop: 3977.25
  • Profit target: Half at 4158 and the other half at 4314

More about double busted patterns and the triangle shown in the ES technical analysis video

Traders seek for a chart that shows a definite rise in the price of an asset, followed by two downward moves that bring the price down to or below its original starting point to identify a double busted pattern. When the price fails to break above its prior high and instead continues to fall, frequently at a rapid pace, the pattern is complete.

The "busted triangle" pattern is an example of a double busted pattern. This pattern forms when an ascending triangle pattern fails to hold and collapses, resulting in a significant drop in price. The ascending triangle pattern is a bullish pattern that signals that the price is likely to continue heading upward, but it might result in a double busted pattern if the pattern fails to hold.

Both bulls and bears may be ensnared when a double busted pattern forms. Bulls who joined the market during the first uptrend may be caught hanging onto losing positions, while bears who entered the market during the second downward movement may be unwilling to sell and accept gains owing to the possibility of a reversal. As a consequence, when more traders get stuck, the price may continue to fall, creating a self-fulfilling prophesy of a negative reversal.

Traders who notice a double busted pattern may use it as a signal to sell their holdings or move into short positions to capitalize on the downward trend. But, like with any technical analysis pattern, it is critical to validate the pattern with additional indications and to manage risk carefully with suitable position size and stop-loss orders.

Always trade the S&P 500 emini futures at your own risk and visit ForexLive.com technical analysis for additional views.