U.S. Indices (eg. $SPY, $IWM, $DIA) reached unprecedented highs on Nov 29, 2013. Subsequent to reaching these levels, price began to give way and looked lower to find some quantifiable level of support or value area. The question as we approached these price levels of support was: is this a buy-the-dip pullback opportunity or is this the start of the market correction everyone knows is coming.
Initially, it appeared that once the intraday support level of $1801, which buyers defended during three consecutive trading sessions, failed to hold the bid we would see the sell-off. However, buyers managed to find support at the 21-Day MA and bid the markets back above $1801. Market Technicians know there are various ways to identify quantifiable support (or resistance) levels. In the case here, every major Index found support via the 21-Day Moving Average - just look at any Daily chart to see for yourself. The 21-Day MA is a good trend indicator used by many intraday traders. [Note: one of my A+ trade set ups involves this Moving Average]. The 21-Day Moving Average acted as support in Nov'13 for the S&P 500 ($SPY) and the market moved to unprecedented highs. Add in a momentum oscillator or two and it's easy to see that the "perfunctory bounce" off the 21-Day MA may very well be a viable long entry point as price seems to want to test the previous highs (and maybe move higher to close out the year?). Some stocks have found this same perfunctory bounce pattern as well.
Initially, it appeared that once the intraday support level of $1801, which buyers defended during three consecutive trading sessions, failed to hold the bid we would see the sell-off. However, buyers managed to find support at the 21-Day MA and bid the markets back above $1801. Market Technicians know there are various ways to identify quantifiable support (or resistance) levels. In the case here, every major Index found support via the 21-Day Moving Average - just look at any Daily chart to see for yourself. The 21-Day MA is a good trend indicator used by many intraday traders. [Note: one of my A+ trade set ups involves this Moving Average]. The 21-Day Moving Average acted as support in Nov'13 for the S&P 500 ($SPY) and the market moved to unprecedented highs. Add in a momentum oscillator or two and it's easy to see that the "perfunctory bounce" off the 21-Day MA may very well be a viable long entry point as price seems to want to test the previous highs (and maybe move higher to close out the year?). Some stocks have found this same perfunctory bounce pattern as well.
*** Names to Trade - THESE ARE SHORT TERM TRADES *** Typically 1-day to 1-week:
Cigna Corp (CI) traded down to test a previous old high from Sep'13 and used the 21-Day MA as a support. RSI is also indicating the previous uptrend should continue. RSI(21) stayed above the 50-line and the RSI(5) moved back above the 30-line. In an uptrend, these RSI characteristics are usually a good indicator of continued strength.
Bias: LONG
Bias: LONG
Danaher Corp (DHR) used the consolidation area breakout as a measure of support. The 50-Day MA is also in the area for an added measure of support. Price should test previous highs.
Bias: LONG
Bias: LONG
Honeywell International (HON) reflects a great technical play wherein support is defined by the 50-Day MA and the 38.2% Fibonacci Retracement. Looking for price to move higher to the $91.5 price area.
Bias: LONG
Bias: LONG
McKesson Corp (MCK) used the previous area of price consolidation as an area of support. Price also used the 21-Day MA as a measure of support. Price using the 21-Day MA as support reflects the pattern currently seen in the major indices. As the major indices move higher, MCK and others with similar patterns should follow suit.
Bias: LONG
Bias: LONG
Wells Fargo &Co. (WFC) is mirroring the major indices as well as the $XLF wherein price traded down into the 21-Day MA and subsequently experienced the "perfunctory bounce" off the MA to move higher. As the major indices move higher, this name should follow suit and test the previous high (or make a new high).
Bias: LONG
Bias: LONG