Rather than focus on a specific trade today, I think it’s more important to focus on the environment we’re trading in.
There are several key price levels in the major indexes and sectors that traders and active investors should focus on to anticipate the bullish or bearish sentiment of the market.
You have a much better chance of any trade working if the market is going your way.
Therefore, Monday is a good day to anticipate answers to two important questions about the major markets and sectors.
- Where might the markets reverse in a bullish or bearish way, and
- Where might the markets accelerate (breakout) in their trends?
This week there are some big opportunity points in the answers to these questions.
SPY: Look for support and a bullish reversal if it pulls back into the $266-$267 level. Look for a rally to stall around the 200-day moving average at $274.
QQQ: Look for support and a bullish reversal if it pulls back into the $165-$166 level. Look for a rally to stall around the 200-day moving average at $171.50.
IBB: This the Biotech ETF, and it’s had a month-long consolidation at the 200-day moving average. A breakout over $112 will likely lead to a swift move higher. This would also be a bullish sign for the general market.
SMH: This is the Semiconductor ETF, and it can be a good measure of traders’ sentiment for tech stocks. If it closes over $99 it would be bullish, however, it’s not in a good location to trade.
It has a lot of resistance, including its 200-day moving average between $100-$102.
Use it as a market indicator. If it continues to move higher, the tech sector is bullish.
If SMH pulls back, look for a bullish reversal in the area of $94.50 – $95.50.
If SMH breaks $94 its bearish for it and the market.
Rick Nartarian, Chief Investment Officer
The American Investor Daily