I don’t mind big down days, but Friday’s drop changed the market’s condition.
The QQQ just gave back the prior day’s gains, but the IWM closed below important support levels.
Here’s a stock that could take off if the market doesn’t sell off.
There are some important levels to watch to determine if Friday gave us a buying opportunity or a market top.
With the SPY below 280 and the IWM below its March swing, it is prudent to keep your stops tight and wait for the market to demonstrate some strength before entering new positions.
The key level to clear in the SPY is 282. Additionally, IWM needs to close comfortably over its 50-day moving average.
Until the bulls regain these levels, Friday looks more like a top than a one-day sell-off.
However, if the market doesn’t sell off, there are some very interesting setups.
Check Point Software (CHKP) ignored the sell-off on Friday. It only declined a modest amount, and it is in a nice flag within a strong trend.
Like a lot of strong stocks, it does look a little extended so I would consider this a trade looking to potentially catch a nice quick $10 move while risking $2.
If it breaks out of its flag pattern by trading over $127 then, Friday’s low becomes a good stop.
Friday’s low is $125.11, so the stop should be under 125. With an entry over $127 that gives you about a $2 risk.
As I said above, I would not advocate new entries if the market doesn’t rally, so be patient.
Additionally, if the market sells off, CHKP has good support at $123. This may provide a different opportunity so either way, CHKP should be on your watch list.
Rick Nartarian, Chief Investment Officer
The American Investor Daily