I’ve always been obsessed with strategy games.

As a kid, it was all about Monopoly…

Then in college, I fell in love with poker…

Nowadays, I’m obsessed with trading.

I find it fascinating that the rules of the game can change, but human behaviour always stays the same.

And like with every game, there are different levels of skill you can reach as a player.

When it comes specifically to strategy, there are three distinct levels…

To see what I mean, let’s use poker as an example for these three levels…

The first level is where you think only about your own cards.

The second level is where you start thinking about what cards your opponent might be holding.

The third level is where you manipulate your opponent into thinking you have certain cards, or bluffing.

It’s no different with trading. And right now, I think the market might be bluffing a little bit…

There’s this huge, bullish reversal pattern taking shape in the S&P 500. The only problem is that it’s too obvious.

You might have even spotted it yourself. It’s a large, inverse head and shoulders pattern.

You can see it below…

The inverse head and shoulders is a classic reversal pattern. Once prices break through the neckline, traders will look for a very sharp move higher.

But like I said, plenty of other folks have noticed this pattern too.

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Check out a couple of tweets from last week where some well-recognized accounts have notified their subscribers of this same pattern.

The first tweet was viewed by over 200,000 people…

But unfortunately, the market rarely rewards the popular trade.

Traders that are only able to think about the first two levels of strategy will probably jump into this trade without thinking twice.

But traders who can operate at the third level will likely take a step back and wonder if this is simply too good to be true.

I wouldn’t be surprised to see the market accelerate a bit further. But then… don’t be shocked if the rally sputters out and reverses violently.

Of course, only time will tell if this is a valid setup or not.

Another key to good trading is recognizing when you’re wrong to be able to pivot quickly.

I’ll keep you updated if I see signs that the breakout of this inverse head and shoulders patterns is real.

Happy trading,

Imre Gams
Analyst, Market Minute

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