Thursday, February 26, 2009

Formidable Resistance

Once again the S&P 500 failed to pierce the 775-780 resistance area (see 30 min. chart above). This will be a key level to watch going forward. With today's downdraft the 30 min. chart has change from an uptrend to more of a trading range between about 780 and 743 ish. A valid break of either level could trigger the next move in the market. Unil then, we may just get more chop, which is fine and dandy for day traders & those with positive theta trades, but perhaps a bit frustrating for swing traders.

Just a heads up, tomorrow we've got the GDP report come out pre-market at 8:30 AM EST. This is usually a market moving number, so it may be the catalyst to push us out of this 30 min. trading range.
One other quick chart for you to mull over. GLD has formed a bullish retracement over the last week, dropping back down to its breakout level. One of the common axioms of technical analysis is that prior resistance typically becomes new support. It will be interesting to see if we hold this level and give it another go at $100.



Ajit said...

Are you concerned about a possible double top around 100 area on GLD? There is still a 7-8 points move to go before we reach 100 again, but for a position trader, would you suggest to stay out until 101 is broken?

Tyler said...

It really comes down to personal preference. Yeah, gold could fail at $100 again, but 7-8 points is more than sufficient to produce an acceptable profit in my opinion. You've just got to decide if the potential reward is worth the risk. Even on a position trade, if you get an $8 move in your favor you could move your stop to your entry price to minimize the risk-


A most interesting post on resistance.