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Tentative Breakouts Fail To Hang On

Courtesy of Declan.

Markets had started Friday above the marked consolidations I had drawn on the charts but subsequently ended the week still inside these trading ranges. As a two-day pattern, Friday’s close finished as a bearish engulfing pattern across markets which means I’ll be looking for a break of newly drawn ascending support (of the last 8 days) in these indices.




The S&P still has a MACD and On-Balance-Volume  trigger ‘buy’ signals but Friday’s high (and the high of the bearish engulfing pattern) was the 50-day MA. Sidelined bulls will want to see a convincing break of the 50-day MA, and probably the downward channel before committing. Bears have the easier play – helped by the strong relative underperformance of the index against its peers. Short the loss of Friday’s low with a stop above 2,680.






The Nasdaq is in a similar position to the S&P; Friday’s reversal came away from converged 20-day and 50-day MAs with a similar technical picture. The same short play opportunity is on offer: sell loss of 7,708 with a stop above 7,185.





The Russell 2000 actually managed to clear its consolidation, its 20-day and 50-day MAs. Unlike other indices, there was no drop back inside the consolidation.  In addition, relative performance continued to improve.  All this suggests a bullish outlook but I have also drawn in a possible ‘bearish wedge’ too.





As for other indices, the Dow Jones Index reversed from channel resistance in what is a good shorting opportunity. Risk is measured on a break above 24,650 with a target of the lower channel.





For Monday, look for a break of Friday’s lows. A weak open will present a shorting opportunity which could last a few days – if not a few weeks. Decisive moves above 20-day/50-day MAs on volume will negate the short play.




You’ve now read my opinion, next read Douglas’ blog.




I trade a small account on eToro, and invest using Ameritrade. If you would like to join me on eToro, register through the banner link and search for “fallond”.




If you are new to spread betting, here is a guide on position size based on eToro’s system.






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