Last week, a candlestick pattern was outlined in SPY, displaying signs of vulnerability, with confirmation on Thursday. Friday’s sell-off touched down on the gap, the first support level highlighted, and rallied back up.
The Russell 2000 Index and Dow Jones Industrials look poised to pull back approximately 1% more to test their support levels, the previous resistance. If Friday’s low is broken in SPY, the trend line and the 50-day Simple Moving Average are likely to be the next support levels.
A potential bullish scenario, following a pull back, is a break above the 134 resistance level. A continuation inverse head and shoulders pattern would then be triggered with a minimum expected price objective of $143. Below are charts of SPY and the indexes mentioned, as well as, a trade idea in IPG Photonics Corporation (IPGP).
Chart 1: Daily chart of SPY, Russell 2000 Index and Dow Jones Industrials illustrating potential support levels. In addition, a potential bullish scenario is outlined for SPY.
In February, a significant gap-up pushed IPGP to new all-time highs. A few sessions later a pennant, consolidation pattern, began forming. The upper boundary line was broken, triggering the pattern, at the end of March, along with increasing volume. Currently, it is basing above the upper boundary line, and heavy volume on Friday may be signaling that the next up leg is near.
Chart 2: The daily chart below outlines the pennant formation and breakout. Target: minimum expected price objective is $67, obtained by measuring the height of the pattern and expanding from the trigger point, by the same distance. Protective Stop: Daily close back below the upper boundary line.
IF YOU ARE INTERESTED IN RECEIVING ZEV’S FREE DAILY MARKET LETTER, EMAIL [email protected] SUBJECT “INSIDER”
Disclaimer: The information contained herein is not guaranteed. This is not a solicitation of any order to buy or sell. This material is based upon information that I consider to be reliable, but I do not guarantee its completeness or accuracy. Assumptions, opinions and recommendations contained herein are subject to change without notice, and I am not obligated to update the information contained herein. I may have a position/s in the security or securities mentioned. This communication, including any attachments, is for the exclusive use of the intended recipient(s) and/or the intended recipient’s designees. Any use, retention or dissemination by a person other than the intended recipient is strictly prohibited. If you are not the intended recipient or designee, please notify the sender immediately by return e-mail and delete/destroy all copies of this communication.
Business Insider Emails & Alerts
Site highlights each day to your inbox.