Tag Archives: Support

With Goldman Sachs (GS)breakdown under the $ 140 “Round Number” Reference level today, let’s take an updated look at the chart and identify the new key levels to watch.

First, the Daily Chart and initial support break:

We’ll see shortly that we can develop a Bull/Bear Game-Plan for short-term trading tactics (management) in terms of real-time price interaction with the $ 140 and $ 138 level.

First, we’ll take a look at the bigger picture uptrend and potential reversal in structure that would signal a new downtrend, particularly if price holds and closes under the current area – in sum, price hangs over the edge of a price support cliff.

The Momentum Oscillator peaked in mid-January while price traded in an uptrend into the $ 145 area.  From there, price continued to peak just shy of $ 160 per share while we can see a visual loss of momentum or clear negative divergence.

On the initial downswing from the high, sell-volume spiked while buy-volume declined relative to the recent past, suggesting a potential change in structure or market character (volume weaker on rallies and stronger on declines).

Price then broke the rising 20d EMA to fall toward the rising 50d EMA, only to break that level cleanly in March.

A vicious ‘bear trap’ (a break under the 50 EMA that results in a sudden burst of buying pressure higher, trapping those who triggered aggressive short-sale positions) developed that thrust price into the $ 150 level – note the clear decline in buy-volume on the ‘trap’ or short-squeeze event that propelled price from $ 140 to $ 150.

We’ll focus our attention now on the recent sell-swing in price that was met with a surge in sell-volume along with a new momentum low.

The “risk” is that the short-term trend continues to reverse to the downside which opens the price toward a sell-pathway toward lower support targets including the $ 125 region which is the current confluence of the rising 200d SMA and horizontal support line as drawn.

Before we turn extremely bearish on Goldman, let’s take a look at a short-term Fibonacci Grid that highlights the key level for this week:

Starting with the December swing lows near $ 115 and $ 125, we see two Fibonacci Retracement grids drawn to the $ 158.50 high on February 19, 2013.

The two spots that draw our attention are the $ 141.60 level (most recent “bear trap” spike low) and the current $ 137.50 region which is the current intraday low.

Note the classic interpretation of how Fibonacci Levels work – one looks for a support bounce off a reference level, but if a particular level fails as support, then a trade (or pathway) opens up to the next lower level.

If price doesn’t “bounce” or retrace higher from the $ 137.50 confluence support region, then an automatic downside targets the $ 132 level.

A future failure into $ 132 opens up the Daily Chart pathway toward the $ 125 confluence – again these are bigger picture concepts and levels.

Individual trades are likely to develop on the lower frames for swing and intraday traders to take advantage of support or breakdown – or even retracement – events that occur in the context of broader frame ‘pathways’ to targets.

Let’s take a final look at the intraday chart to note recent support shelves and breakdowns, and focus our attention on the current level:

I drew highlighted boxes to reflect intraday support shelves that corresponded with positive intraday divergences, but price would later break under each ’shelf’ level to trigger a quick intraday breakdown opportunity which continued the intraday downtrend in motion.

The most recent shelf developed briefly into the $ 147 level, and the break under that level resulted in the quick sell-off toward the prior $ 142 support level.

Wednesday’s breakdown sets the stage for the “Battle for $ 138.50″ which is the Fibonacci Cluster Support level that plays against a potential reversal of structure on the Daily Chart that opens the stock to lower levels.

Keep focused short-term on the interaction between $ 138 and $ 140 and keep in mind that sellers have already entered breakdown trades on the support break and have placed logical stop-losses above $ 140, resulting in a ‘cluster’ or pocket of stop-losses which will trigger on a break higher above $ 140 and particularly $ 142 (the green region).

On the other hand, a failure to rally back above $ 140 (and especially a breakdown under $ 138)  could result in the continued selling pressure both from buyers/bulls taking profits from prior positions – and buyers/bulls taking stop-losses from recent trades – which would join with short-sellers putting on new positions for an expected breakdown.

Monitor real-time activity relative to these areas and the reversal signal that will develop on the chart in the event that we see a sustained break under $ 138.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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This morning brought a continuation of the short-term downtrends for Gold and Silver as price collapsed toward a critical target zone which now calls our attention.

Let’s take a quick, simple look at the current structure and critical levels to watch for these markets at the moment.

Gold Daily Chart:

The key focal point is $ 1,600 which is a “Round Number” level aligned with the midpoint or prior value area of the mid-2012 triangle range pattern.

Today’s breakdown back under $ 1,600 and the rising ‘flag’ trendline does put a bearish bias and breakdown signal for gold, suggesting an eventual retest of the $ 1,560 low of 2013 or even $ 1,550 which is a critical weekly reversal/pivot level.

While the daily chart has turned bearish and confirmed the short-term downtrend in motion, let’s focus on the intraday level to watch as a potential pivot.

First, note the “Three Push” multi-swing negative momentum divergence pattern from mid-March in conjunction with the rally toward the $ 1,620 target zone.

This is a great example of higher timeframe targeting (key inflection levels) and intraday (lower timeframe) developments that provide additional clues the daily chart can’t reveal (like the divergences here).

Today’s pre-market and opening session resulted in a breakdown under the short-term $ 1,596 trendline as buyers failed to defend gold at the key $ 1,600 short term level.

A sudden sell-swing developed which broke the market to the prior swing low (short-term target) at $ 1,580; it’s this level where we’ll focus our attention.

We’ll be watching for any sort of upward retracement off this level and measuring the strength of the bounce-back rally, but if gold suddenly reverses and breaks under $ 1,580, it would trigger the higher timeframe target toward the $ 1,560 to $ 1,550 prior and critical support lows.

The picture is similar in Silver – here’s the Daily Chart:

Both Silver and Gold are breaking under their midpoint (value area) from the mid-2012 consolidation range pattern which puts the mid-2012 lows ($ 26.50) back in play as potential short-term targets.

Also like gold, silver faces an important short-term level into the current $ 27.50 – it’s the lower boundary of the falling parallel trendline channel drawn above along with a weak horizontal price polarity level.

Unlike gold, silver does not have a short-term pivot swing low to target – it pushed to new lows not seen since July/August 2012:

While gold experienced a visual breakdown this morning, silver led the way to the downside with the breakdown gap on March 27 which resulted in a snap-back retracement or retest of the key horizontal trendline into $ 28.70 which set the stage for the recent ‘collapse’ or breakout impulse to the current $ 27.50 level.

Momentum also has been weak (making new visual lows) on the breakdown.

As always, we’re constantly assessing the probabilities of pro-trend continuation (which suggests these levels will fail as support) and short-term retracement or even aggressive reversal opportunities (which is why we focus on these levels).

The current levels will either serve as short-term ‘bounce’ catalysts for aggressive traders, or a breakdown under these levels reaffirms the short-term downtrend in motion and opens an opportunity to play for the prior lows as seen on the daily chart.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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I wanted to do a quick update on the current support/inflection level on the S&P 500 which could set the stage for the rest of the trading week.

Let’s look at the Daily “EMA Confluence” level along with the hourly intraday rising trendline pattern.

In simplest terms, the key level we’re monitoring is the 1,410 level which reflects the confluence (crossing) of the 20 and 50 day exponential moving averages (1,413 and 1,412 respectively).

The last time we had a similar pattern of price moving INTO the 20/50 day EMA confluence was early November where price touched this level two times and reversed lower, continuing the downtrend that triggered on the break of the rising 50d EMA.

We’ll be watching for a possible continuation of the uptrend that similarly triggered on the move above the 50d EMA in late November, but we note that the recent price action ABOVE these levels has been relatively weak and divergent.

We can also see that 1,410 is a Price Polarity Level, meaning price has recently respected this index level as both resistance (August 2012) and support (October 2012).

Bullish short-term strategies will be favored above this level while bearish ‘breakdown’ strategies will be favored under it (and especially under 1,400).

A glance at the hourly chart shows a price trendline intersecting this level as well:

Assessing Market Structure, we see a short-term uptrend as evidenced by the progression of higher highs and higher lows along with a bullish EMA Orientation (the 20 remained above the 50 EMA).

At the moment, we see a similar hourly EMA support confluence into 1,420 but the most important factor is of course the possible continuation of the inflection up (starting this morning) off the 1,410 rising trendline and Daily EMA confluence level.

We’ll place our intraday strategies within this context and be aware to any sudden changes such as a sudden reversal break back under 1,420 and of course any bearish activity under 1,410 which would trigger bearish defensive activities.

Continue monitoring price action relative to these levels and adjust accordingly should the need arise.

Corey Rosenbloom, CMT
Afraid to Trade.com

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In last week’s post on Gold’s chart, I highlighted the breakdown and new momentum lows which suggested a deeper retracement toward the $ 1,700 to $ 1,720 targets.

With gold achieving those downside targets this week, let’s take a look at the current key levels and note the levels to target on the upside if support holds, or downside targets if $ 1,700 suddenly fails.

Here’s the larger perspective daily chart:

With the divergences into the October high at $ 1,800, odds favored a price retracement to lower support.

Once price broke under the rising 20d EMA, the next lower support target became the 50d EMA at $ 1,720 and beneath that is the $ 1,700 “Round Number” Level.

That’s where we focus our attention currently in terms of the short-term picture in gold.

As we can see in the chart above, the $ 1,700 area is also the 38.2% Fibonacci Retracement as drawn and it’s a simple “Round Number” Reference level.

There’s absolutely no guarantee this level will hold which is why we craft “Support/Bounce” upward targets and “Breakdown” lower price targets.

A strong bounce simply targets the $ 1,740 level, and a firm breakthrough above that suggests that the larger trend has resumed to the upside, opening the pathway eventually to $ 1,800 again.

We’ll see that short-term odds seem to favor the “Bounce” logic, but if sellers suddenly resume command and break price cleanly under $ 1,700, we would need to look to lower potential support targets.

The next logical immediate support confluence develops at the overlap of the 50% Fibonacci Retracement and the 200 day SMA at $ 1,670.

It will be at $ 1,670 – should price break under $ 1,700 – that we’ll develop the same “Will it Break or Will it Hold?” logic.

The lower frame supports the “Bounce” Thesis unless we see a sudden break under $ 1,700:

Be sure to reference the intraday chart from the prior update to see a lesson that was played out in real time regarding the important Momentum Principle (momentum precedes price).

The new momentum lows on October 15th I highlighted did suggest that lower price lows were likely yet to come – they did.

The current intraday chart shows minor positive divergences as price challenges the support of the $ 1,700 confluence.

Today’s upward action and spike in momentum also tilt the odds to favor further upside action (the “Retracement” Thesis) and that’s what we’ll be monitoring into next week.

We’ll need to see price confirm the upward move with a breakout above the $ 1,720 short-term level and if so, we’ll continue looking for the $ 1,740 level as a minimum upside target.

Once again, there’s never a guarantee any support level will hold, so if you’re trading gold on the short-term frame, keep a keen focus on what happens at the current “Battle for $ 1,700.”

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Corey Rosenbloom, CMT
Afraid to Trade.com

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The S&P 500 currently rests near a midpoint of the recent swing high and low, but there’s a key support level we’re watching for clues as to which level to target next.

Let’s update the current S&P 500 near-term support and structure chart, starting with the Daily Frame:

Keeping the chart as simple as possible, the key reference level this week will be the 1,340 EMA and Fibonacci (seen below) cluster.

A successful defense of support here suggests a play back to the recent 1,375 high while a failed support defense opens the target back to 1,320 or even 1,300 on a sharper sell-off.

Let’s take it one factor at a time – the 20 and 50 day EMAs converge (cross) just above 1,340 (1,343 and 1,341) and will be an indicator-based level to watch for a potential reversal.

Should this support level fail soon, we’ll reference the broader “Flag” or rising parallel trendline structure currently situated at 1,330 (support) and 1,380 (resistance).  This would be similar to a rectangle consolidation pattern.

We can see more details on the intraday chart as we add a recent Fibonacci Retracement Grid:

The 50% Fibonacci Retracement as drawn rests at 1,345, roughly where price trades currently.

I drew the Green and Red pathways depending on how price reacts to this visual level:

A bullish reversal here (continue monitoring intraday charts) suggests a move traveling toward the 1,370/1,380 level while a failure or breakdown here instead opens the possibility for a continued decline toward the 1,320 Fibonacci and rising trendline (support) confluence.

For intraday/short-term traders, watch these levels and parameters closely.

How you can use Fibonacci to improve your trading

Corey Rosenbloom, CMT
Afraid to Trade.com

Following up from last week’s post on “Triple Stock Index Key Levels,” let’s take a quick mid-week update on what’s happened and what support levels continue to be key focal points in the “Big Three” US Stock Market Indexes.

Let’s start with the S&P 500:

The prior update focused on the 1,300 support bounce with the 1,275 as a likely target point should 1,300 fail – which was the case.

The resulting sell-off cascaded price towards – and just under – the 1,275 confluence which has served so far as the key if not “Make or Break” support level to watch.

This level stretches back to the polarity swing highs from late 2011, as is the case in the other Indexes (though the Dow Jones broke under these prior highs briefly).

Speaking of the Dow, let’s update the current picture:

In the prior update, the 12,200 was the interim support which – when broken – targeted the “round number” 12,000 confluence.

So far – like the S&P 500 – the Dow has rallied initially off the 12,000 level which can be viewed in part as a “psychological” or “easy-reference” support.

It will be the index level to watch for any sign of breakdown – an absence of a break under 12,000 allows for a higher rally into resistance.

The NASDAQ also successfully rallied – so far – from its 2,750 key support confluence:

The picture is similar to that of the S&P 500 where the late 2011 swing highs (polarity) held as current support.

The “polarity” level overlapped with the rising 200 day SMA into the 2,750 region (2,760 to be exact) and now it’s up to the buyers/bulls to rally the index and defend support.

In this quick “support check-up,” it’s important to incorporate these key Daily Chart levels into the methods and strategies you’re using currently.

These levels are most likely the critical support reference levels that could spark action – an initial rally from here (which would be logical) or else a potential sharp sell-off should these levels fail as support.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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After a steady retracement took the US Stock Market Indexes to lower support level targets, let’s take a look at these targets and what Index levels we will watch closely in the week ahead.

Let’s start with the S&P 500:

The key chart levels we will be comparing across the three indexes are the 38.2% Fibonacci Retracement and the 200 day Simple Moving Average.

In the S&P 500, the key “Round Number” psychological reference level is of course 1,300 and buyers stepped in throughout the trading day to defend this level.

Beneath 1,300 is the critical confluence of the 38.2% Fibonacci Retracement at 1,290 and the rising 200 day SMA at 1,278, making the 1,280/1,290 area the key indicator-based confluence support.

If we stretch back to late 2011, we also see the 1,290 level was a spike high in October, making it a polarity support level.

Quite simply, we will be watching the market relative to this level, being cautiously bullish above 1,300 (notice the 20/50 EMA cross and price target near 1,350) and otherwise bearish under 1,270.

The picture is similar in the Dow Jones Index:

While the S&P 500 reversed at a logical prior price support level, the Dow Jones power-rallied off 12,400 which is above the equal confluence of the 38.2% Fibonacci Retracement and 200d SMA at the 12,200 level.

As such, 12,200 will be the indicator-based confluence support which aligns also with the visual resistance from late 2011.

Finally, the NASDAQ also rallied today slightly above its critical confluence:

Unlike the S&P 500 and Dow Jones, the NASDAQ Index actually broke the 38.2% Fibonacci Level on Friday and clawed back above the 2,800 level.

However, similar to both the S&P 500 and Dow Jones, the NASDAQ also formed its initial rally above the weak confluence near the 2,700 and 2,750 level.

Again, we reference the late 2011 swing highs in price with the 50% Fibonacci Retracement and 200d SMA.

Be sure to add these reference levels to the trades and analysis you are conducting in these indexes.

Corey Rosenbloom, CMT
Afraid to Trade.com

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India’s “Nifty 50″ Stock Index currently faces a key inflection support level at the 4,800 level.

Let’s take a quick look at the Index and plan for potential action at this visual chart level.

First, let us see the Confluence Support Line that develops from the Weekly Chart:

Again, a quick look shows the 4,800 Index level as the visual focal point for potential confluence support on the chart.

This builds from the flat 200 day Simple Moving Average currently resting at 4,819 and the 38.2% “Bull Market” Fibonacci Retracement at 4,873.

It’s worth noting that Confluence Support Levels are not mystical levels were price is required to reverse; instead, they are levels that often drive additional interest and trading activity that could shift the supply/demand balance.

In other words, buyers have a low-risk, high-reward potential opportunity that could spark a bounce here potentially to target at least 5,250.

However, if collective selling activity is stronger that collective buying activity at this key level, then it would open the index to target lower support levels such as 4,500.

In this way, we follow price as it trades relative to key inflection areas – the index has the potential for bullish movement above 4,800 or else bearish continuation under 4,800 to respective targets.

Let’s see a closer picture on the Daily Chart:

The Daily Chart again highlights the 4,800 region – not the exact number – as a key inflection or turning point for price.

The Index reversed initially higher off 4,750 then traded minimally under 4,700 with positive momentum divergences ahead of a power-rally/bounce in early 2012.

Consider the 4,800 region to be a very important reference level as price (buyers and sellers) again interact at this key level.

Short-sellers may decide to take profits (exit positions) near this level while buyers may decide to put on new swing-trading positions.

The interaction here – and whether sellers can collectively break this support level – will be key in playing the next few weeks in the market.

Corey Rosenbloom, CMT
Afraid to Trade.com

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One of the big headlines of today was the sharp decline and breakdown under chart-based support in Gold.

Let’s take a look at what happened, what levels are important here, and what current structure reveals.

First, the intraday 30-min “Structure” Chart of Gold:

When we are assessing “Market Structure” or “Swing Structure,” we simply note the progression of price highs and lows to create a reference.

Take a moment to review a recent “Multi-Timeframe Structure” lesson using Silver to highlight the concept.

We use structure to determine uptrends, downtrends, or – in the case of gold’s intraday chart – sideways trends.

On the chart above, we can see gold “building” a sideways structure (trend) with clear converging ‘Symmetrical Triangle” trendlines.

The immediate levels going into today’s session were $ 1,630 for lower support and $ 1,660 for upper resistance.

Pre-market, Gold broke the ’structure’ and an intraday trend day or sharp sell-off resulted from the initial movement out of the Triangle structure.

With the intraday triangle image in mind, let’s pull-up the perspective to the Daily Chart:

As I’ve been highlighting to Weekly Inter-market Members lately, Gold has been bouncing off the short-term $ 1,620/$ 1,630 level and failing (giving short-term retracement entries) into the overhead 50 day EMA.

Today’s session broke this pattern that developed in March and now the market faces a critical “Make or Break” support test at the $ 1,600 round-number easy reference line.

While $ 1,600 is easy to remember, it’s also an important polarity level, serving as support multiple times as seen with the horizontal yellow highlight above.

Buyers continued to step-in to support (purchase) gold at the $ 1,600 level with the exception of a two-swing breakdown in December 2011.

Keeping it very simple, $ 1,600 is thus the key “Bull/Bear” reference level – gold has a bullish bias while price is above $ 1,600 or else a bearish bias while under it.

A continued sell-off here suggests $ 1,550 or even $ 1,525 would be the next support level (or target price if you are short-selling under $ 1,600).

Gold’s Momentum/Volatility Cycles

I also wanted to highlight the persistent “Momentum Compression” (almost like a triangle pattern) in the 3/10 Momentum Oscillator.

Periods of price expansion or ‘big impulse/trending’ moves tend to emerge from low-volatility or compressed periods in price.

Stated differently, price in general tends to alternate (rotate) between sustained periods of high then low (then high) volatility.

We would call the July to October 2011 period as “high volatility” which gave-way to the recent multi-month compression or reduction in volatility.

One would suspect a future higher volatility period would result, particularly if we see a breakthrough trigger under $ 1,600 (for the bearish side) or alternately above $ 1,700 (to the bullish side).

Nevertheless, while $ 1,600 may seem too simple to be a key level to watch, it’s the important reference level for the immediate future.

Corey Rosenbloom, CMT
Afraid to Trade.com

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Let’s update a key situation we’re following in the commodity markets of Gold and Silver.

Both markets are showing similar “bullish divergences at support” which gives us a key level to watch for any reversal… or breakdown/failure… in the weeks ahead.

Let’s start with Gold to note the key trigger and target levels along with the divergences:

Our April 13th update on the “Triple Timeframe Key Levels for Gold” pinpointed the current $ 1,640 level as critical to the market.

Though we saw a sharp bounce from $ 1,620 to $ 1,680 after that update, price has returned to challenge the $ 1,640 level which will be critical going forward.

I’m showing a color-coded “structure” chart to highlight the key declining trendline which currently intersects the 50% downside Fibonacci Retracement at $ 1,664.

Traders could look to a price breakthrough above this level as a potential bullish trigger for a continuation move expected into $ 1,700 for a minimum/small upper target.

That’s the bullish suggestion from the repeated ‘bounces’ off support and the persistent positive momentum divergences… but an upside outcome is by no means guaranteed.

Instead, should price break under $ 1,630 then continue trading to the $ 1,600 level, look for a round of liquidation and bearish-positioning particularly on a breakdown under the $ 1,600 ’round number’ confluence level.

While odds tilt towards the bulls above $ 1,640, each lower price support level that breaks serves to tip the scale more to the bearish side until odds would favor a breakdown under $ 1,600.

The structural picture is very similar in Silver (support divergences):

Silver experienced a more prominent ’spike’ higher at the end of February that took out the November 2011 price high – unlike gold.

From there, price has retraced in an intraday downtrend fashion all the way back to the $ 31 level which is just above the 61.8% Fibonacci Retracement and “price polarity” level at $ 31.60 from prior support and resistance (mini-reversals).

That being said, we’ll be watching silver relative to the horizontal green support bar I drew just under $ 31.

For reference, silver becomes a potential breakout buy candidate above the falling trendline at the $ 32.00 per ounce level.

Above $ 32 suggests a continuation move back to the $ 33 level and beyond that on a trigger break above $ 33’s resistance (Fibonacci and Price Polarity).

Feel free to take a look at a recent lesson I wrote about “timeframe trend identification” using Silver as the example market.

For these related markets, keep focused on the defined horizontal support levels along with the falling trendline for potential trading triggers on any breakout.

Corey Rosenbloom, CMT
Afraid to Trade.com

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