How to deal with SPY


Earning Channel


Mr. Buffett Suggested Average Americans to buy SPY.

However, we urge ordinary investors to treat ETFs with respect, especially those already gained multiple-fold. You need to know what you are doing.

In 3/27 there was a drop in SPY. The daily chart seemed to be forming a top. What to do then? Sell all and walk away? Start shorting? We used Earning Channel’s monthly, weekly, and daily charts to analyze the price movements, and gave suggestions to proper actions.  The result turns out to be astonishingly accurate.

In the analysis, we suggested to buy some near $234, and to take some profits near $239. If a major correction occurs, have a major position reduction at $230, and clean long position at $204, which is about 15% off from the top.

Please notice that, at that time, there was no chart from 3/27~5/18.

The analysis gave a pretty good prediction. If you downloaded Earning Channel and worked with it, you would have been given alerts for action taking. You might have already made some profits. More importantly, you should have avoided the losses in 5/17.

To better understand how the numbers were derived please refer to

SPY: What to do now?

To see the channel trading chart clearer, we enlarge it below.

Let’s see if we can make channel-trading work for us now. Again we use the monthly, weekly, and daily channel to determine the conduct of the transaction.

The monthly channel is the guideline, weekly channel as the reference, and daily channel for the action.

The monthly channel tells us that it is not broken yet, and the price is near the upper wall. It is time to take profit. But not yet time to panic.

The longer term weekly channel tells us that the channel is converging and the price is near the lower wall. Converging indicates the end of a trend. So, the upward trend may be near the end. If we zoom in, the price is breaking the lower wall. It is time to sell. It is not yet the time to clean.

The price also reaches the lower wall of the daily channel. If the price reaches the break-down line, you should consider cleaning your long position, at least substantially reduce the size.

Let’s use the weekly chart to set channel trading. The original chart is converging and very narrow. We use “peaks and dips” offered by Earning Channel to set a more parallel channel.

We then adjust the channel-break-up line to slightly touch the previous overbought. If the price bounces back and touches this line, it is the time for major (future) profit taking.

We adjust the channel-break-down line to below previous lowest dips. One should consider selling all when the price reaches this line.

The setting tells to

  • Take major profit (Channel-break-up) at $263.29
  • Take profit (Channel-sell-point) at $243.36
  • Buyback (Channel-buy-point) at $228.84
  • Clean (Channel-break-down) at $215.80

Please remember, the sell-point or buy-point is when the price reached the wall and bounced back into the channel.

You can download Earning Channel, select day/week/month, select or draw the channel, and adjust the channel trading lines. For the adjustment, just press the line and move it.

For instance, you have already gained a lot, and not afraid of being washed out, then you may want to adjust the channel break-down line closer, to say, $220.

We’ll know if the above setting is effective in a few weeks.

Hope this discussion is useful to you.

Good luck on your investment.

The editors of Earning Channel do not have the above-mentioned stocks/ETFs and do not intend to buy/short in the coming 3 days.

The Earning Channel software, as well as the articles, tutorials and suggestions in the website and social media, are provided as tools and references to help users develop their own market analyses and make their own investment decisions. Users are ultimately responsible for the way in which they use this information to invest in the stock market. Nothing associated with the Earning Channel or the information presented in articles and tutorials should be interpreted as direct advice on buying or selling of securities.