How I Read The Markets: Trendlines And Trading With Precision

Death crosses — when the 50-day moving average falls below the 200-day — used to hold serious weight. But for the last 20 years or so, their effectiveness has diminished. That doesn’t mean the entire concept is useless. What I’ve seen is this: death crosses may still offer value if price returns to the level of the cross and fails to reclaim it. That failure is what I watch for — not the cross itself.

The key is context. Too many traders see a death cross and rush to short, expecting an immediate breakdown. Instead, I treat the cross as an area of interest. If price rises, retests, and rejects that zone, then I may take action. Until then, it’s just noise.

A clean trendline break remains one of my highest-probability setups. But one of the biggest mistakes traders make is assuming that more indicators confirming a setup equals a better trade. For example: combining a trendline break with a VWAP touch, whole number level, and death cross doesn’t necessarily make the trade more likely to work.

Each setup has its own probability. If a trendline trade historically works 61% of the time, adding other “confirming” signals won’t raise that number unless you’ve done the research to prove it. That’s where many traders go wrong — they assume that convergence – when many technical indicators point in the same direction - equals conviction. It doesn’t. The math doesn’t add up like that. Don’t size up a trade just because a bunch of indicators line up.

Instead, I treat each valid trade as its own opportunity. If I see multiple setups across different tickers, I allocate risk across them, not within one oversized trade. That’s how you maintain consistency.

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Recently, I came across an inverse head and shoulders pattern on SPY — and it’s a textbook case of how these structures should work. Here’s the checklist I go through:

• A clear left shoulder, head, and right shoulder
• A neckline that connects the inside of the shoulders (not the peaks)
• A breakout confirmed by a close above the neckline
• A measured move target based on the distance from the head to the neckline
• A predefined doomsday stop below the right shoulder’s low, just in case the move fails

That last point is crucial. A fail-safe trendline may protect you, but in fast markets, you may not get the clean exit you want. Predefining your risk means you stay in control — no matter what the market throws your way.

The reality is, trading isn't about stacking the odds endlessly in your favor with indicators. It’s about

1. Finding high-probability setup

2. Sizing appropriately,

3. And letting the market do what it does.

Whether I'm long MicroStrategy on a trendline breakout or watching SPY test key levels, the process stays the same: define risk, set realistic targets, and follow the plan.

For active traders, especially those who want to learn by doing, TradeZero provides the tools to execute that process with precision — from advanced charting to paper trading and short locates.

This content (the “Content”) is produced by Bob Iaccino. The Content represents the views and opinions of Mr. Iaccino. Bob Iaccino is compensated by TradeZero for participating in Live Sessions and for broadcasting, displaying, and/or presenting marketing and sponsorship materials that promote TradeZero. Mr. Iaccino’s trading experiences and accomplishments are unique, and your trading results may vary substantially from his. TradeZero is not responsible for and neither affirms nor endorses any of Mr. Iaccino’s views or opinions expressed in the Content. TradeZero makes no representations or warranties with respect to the accuracy of the Content or information available through any referenced or linked third party sites. The Content has been made available for informational and educational purposes only and should not be considered trading or investment advice or a recommendation as to any security.

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