Posted September 25, 2020
By Scott Stewart
Fighting for New Support Levels
Good morning folks, and welcome to the Rude Awakening!
Friday is a great time to do a review of everything weve seen throughout another extremely hectic trading week.
So lets dive in
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As for the marketplace overall, were still early in the day today, but indicators are skewing to the downside once again. However, less so than we were seeing in yesterdays premarket.
This morning the NASDAQ Futures are down around 30 points, the S&P Futures down about 9 points.
Taking a higher level view, lets talk about some charts
A Birds Eye View of All Our Markets
We are well below the 50day MA, but it seems like the market is trying to find its new support area.
The range were seeing today parallels past levels of support and resistance.
Looking at the S&P 500, the Dow Jones, and the NASDAQ, we have a great view of where we actually are in the marketplace, and where we can expect to head in the near future.
Take a look at this blue line on the S&P chart below
This is a big area for the market over the past year.
This is an area that has acted as consolidation, support, and resistance at multiple points throughout 2020.
As the chart tells us here, what was resistance can become support.
For a quick refresher on the difference between support and resistance, some simple definitions from Investopedia
The concepts of trading level support and resistance are undoubtedly two of the most highly discussed attributes of technical analysis. Part of analyzing chart patterns, these terms are used by traders to refer to price levels on charts that tend to act as barriers, preventing the price of an asset from getting pushed in a certain direction.
Support, or a support level, refers to the price level that an asset does not fall below for a period of time. An asset's support level is created by buyers entering the market whenever the asset dips to a lower price.
The support level represents a price point that an asset struggles to fall below over a given time period.
Resistance, or a resistance level, is the price at which the price of an asset meets pressure on its way up by the emergence of a growing number of sellers who wish to sell at that price. Resistance levels can be short-lived if new information comes to light that changes the overall markets attitude toward the asset, or they can be long-lasting.
A resistance level represents a price point that an asset has had trouble exceeding in the time period being considered.
To simplify even further, resistance is a top level range; support is a bottom level range. If you think about what these words mean in regular conversation it makes sense support holds you from the bottom; resistance is something you push up against.
What were always looking for in the market is an inflection point, when the market changes direction.
So, a lot of activity we can expect moving forward is going to hinge on whether or not we can hold these current levels.
Or else, if well see another new inflection point -- a big change in direction up or down.
Looking at the NASDAQ is whats most interesting
Its one of the few that still has the Advance/Decline line going down. Thats a big part of what we want to look at.
We are, however, seeing it attempting a level of support similar to what we had back in July of this year.
The NASDAQ of course has the Monster-Caps, or Monsters of Tech, driving the market, and its definitely been trending down.
Its pretty crazy to wrap your head around the fact that, despite the thousands of stocks the NASDAQ is tracking, its those 5 stocks (AAPL, MSFT, AMZN, GOOG, FB) driving it.
My belief is, over the next 3-4 trading sessions, the market will hold at current levels.
But, whether we bounce back or continue to fall, its all the same for us traders. Either way, it presents us some amazing opportunities
Well talk again Monday.
Scott StewartEditor, Rude Awakening