10/26/2018 Markets drop through key support levels on heavy volume this week. MU down 12.5%, and the market is down 4%. This dip is different.

Hi everyone.  I hope you have been able to survive this super volatile week.  Let’s begin our discussion with MU. 

MU weekly 10_26_2018.PNG

Above is the weekly chart of MU.  We’ve officially sliced through the support in the 38-40 range, and now are looking to test the support level labeled “Support 1” above.  I think there’s a good chance we work our way down to “Support 2,” so I’m looking to buy and hold for 2+ years in the high 15-20 dollar range.  

QQQ Weekly 10_26_2018.PNG

On the weekly chart of QQQ, we have definitely broken through trendline support now if we didn’t last week.  The high volume selling confirms the significance of this trendline.  As a result, I think we will see the 150-155 range tested in the next 3-4 weeks.  

QQQ daily 10_26_2018.PNG

Here’s the daily chart of QQQ.  I will point out all the negatives first, then note one strong positive sign.  The main point is that this dip is different.  Our momentum indicators, RSI and MACD, have reached the lowest levels in multiple years.  Notice that the previous dips never had the RSI go below 30, and the MACD looked a bit healthier too.  We are also sitting under the 200 day SMA for the first time in a long time.  

The positive sign is the bullish divergence.  Notice that the RSI made a higher high while price made a lower low.  Unfortunately, we don’t see any bullish divergences on the weekly chart.  That is why I’m favoring that we test the 150-155 zone in the next 3-4 weeks since the weekly chart is more significant than the daily chart.  A drop to the 150-155 zone would be a drop of another 6.5-10%.  Maybe I’m just too pessimistic, and we are due for a bounce.  We have been dropping a lot lately so who knows.

Please join me next week to see what I think! 


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