Notice how the weekly bearish divergence has mostly gone away now – hinting that this upward move has a lot of momentum. I thinking we still move down towards 195 in the near term before possibly moving higher. Either way, if we move down and get near 195, we should expect a volume increase and a large reaction there.
Have a great, peaceful weekend! 🙂
Below is the weekly chart of SPY (S&P500). I’ve calculated the percent increases to new highs from each previous peak. The average increase from the previous high is 2.6% over the last 3 times the index made a new all time high before pulling back. That would translate to a price of about 309 for when the index makes another move lower. Although I probably won’t short at these prices, I definitely would not be buying anything here since the risk/reward is atrocious.
Buyers can look for a retest of 300 before buying, and aggressive sellers can look for a move down to 300 for a quick trade.
Hi everyone. Indexes made new all time highs this week, and my quick short trade was stopped out for a loss. Thinking back on it, I think my stop loss was a bit too close considering the extra volatility indexes have near new highs.
Notice how the last 2 of 3 times the index made new highs, the index only went a little higher than the previous high before pulling back significantly. My short trade was banking on the double top pattern as seen in the middle circle above.
If we get any sort of selling pressure in the next week, I will consider going short again with a larger stop loss this time.
I didn’t think we would get another move up, but since we did, I decided to go short. My stop loss is in the 198-200 range with a target in the mid 170s. Below is the weekly chart of QQQ.
I’m a little concerned that we will reach 198-200 before a downwards correction, but we will have to see what happens next week. By the end of next week we should see which direction the stock market wants to go. I still suspect it’s down otherwise I wouldn’t take this trade.
Hi everyone! Welcome back.
This chart should be very concerning for bulls. Each time the index flirts with new highs, the RSI is lower – meaning the momentum has slowed down. Another move upwards is not unreasonable, but I think we will see a lot of selling beginning next week, or whenever we get anywhere near 195 again.
If I take this trade, my short target is the low to mid 170s, with a stop loss roughly 6 dollars above my entry.
At the end of my last post, I mentioned that we would probably have another small move upwards before moving sharply lower. I think the trade news catalyst has sparked that rally upwards. I think it is a good idea to short at 195 with a stop loss just below 200. The year end target would be the low 170s with a final target in the low to mid 150s. The weekly bearish divergence (displaying the waning momentum) along with the index being at resistance is just too juicy of an opportunity to pass by.
I’m going to use PSQ to go short QQQ in my Roth IRA to avoid capital gains taxes. Remember that you can only purchase (go long) stocks in Roth IRAs. The stop loss on my PSQ trade will be at around 26 with an initial target at about 30. Initial entry will be at around 27 and I plan to take the trade sometime next week (assuming the index goes up).
Despite the strong move upwards on Thursday and Friday this week, I think we are likely to have another leg down before reaching a local bottom. I’ve labeled the supply zone (resistance), and the demand zone (support). I suspect we will have another small move upwards to trap the buyers before moving sharply lower towards the supply zone I’ve labeled in the chart above.