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Paul Rejczak

Paul Rejczak

Writer, Sunshine Profits

Stock market strategist, who has been known for quality of his technical and fundamental analysis since the late nineties. He is interested in forecasting market…

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Stock Trading Alert: More Fluctuations Following Over Month-Long Rally - Topping Pattern Or Just Consolidation?

Stock Trading Alert originally published on April 7, 2016, 6:42 AM:


 

Briefly: In our opinion, speculative short positions are favored (with stop-loss at 2,100, and profit target at 1,950, S&P 500 index).

Our intraday outlook is bearish, and our short-term outlook is bearish. Our medium-term outlook remains bearish, as the S&P 500 index extends its lower highs, lower lows sequence:

Intraday outlook (next 24 hours): bearish
Short-term outlook (next 1-2 weeks): bearish
Medium-term outlook (next 1-3 months): bearish
Long-term outlook (next year): neutral

The U.S. stock market indexes gained between 0.6% and 1.6% on Wednesday, retracing their Tuesday's move down, as investors reacted to economic data releases, Fed talk, among others. The S&P 500 index remains close to its last year's November - December local highs. It continues to trade along the level of 2,050. The nearest important level of resistance is at around 2,080, marked by the late December high of 2,081.56. The next resistance level is at 2,100-2,120. On the other hand, support level is at 2,000-2,020, marked by previous level of resistance, among others. There have been no confirmed negative signals so far. However, we still can see technical overbought conditions. The index continues to trade within a slightly descending medium-term trading channel, as the daily chart shows:

S&P500 Futures Daily Chart
Larger Image

Expectations before the opening of today's trading session are negative, with index futures currently down 0.4-0.5%. The main European stock market indexes have been mixed so far. Investors will now wait for the Initial Claims data release at 8:30 a.m. The S&P 500 futures contract trades within an intraday downtrend, as it retraces some of its yesterday's move up. The nearest important level of resistance is at around 2,060, marked by local highs. On the other hand, support level remains at 2,030-2,040. The market extends its short-term consolidation, following February - March rally, as we can see on the 15-minute chart:

S&P500 Futures 15-Minute Chart
Larger Image

The technology Nasdaq 100 futures contract follows a similar path, as it retraces a part of its yesterday's advance. The nearest important level of support remains at 4,500 mark. On the other hand, resistance level is at 4,540, marked by local highs. For now, it looks like short-term consolidation along the level of 4,500. There have been no confirmed negative signals so far. However, it looks like some sort of a short-term topping pattern:

NASDAQ 100 Futures 15-Minute Chart
Larger Image

Concluding, the broad stock market extends its short-term fluctuations, as the S&P 500 index trades along the level of 2,050. For now, it looks like a consolidation following last weeks' rally. However, we can see technical overbought conditions that may lead to uptrend's reversal or downward correction. Therefore, we continue to maintain our speculative short position (opened at 2,045.56 - yesterday's opening price of the S&P 500 index). Stop-loss level is at 2,100 and potential profit target is at 1,950 (S&P 500 index). You can trade S&P 500 index using futures contracts (S&P 500 futures contract - SP, E-mini S&P 500 futures contract - ES) or an ETF like the SPDR S&P 500 ETF - SPY. It is always important to set some exit price level in case some events cause the price to move in the unlikely direction. Having safety measures in place helps limit potential losses while letting the gains grow.

Thank you.

 

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