Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with entry at 4,540 price level, with 4,630 as a stop-loss and 4,400 as a price target.
The broad stock market reached yet another new record high on Monday, as the S&P 500 index broke above the 4,550 level. Will this rally extend even further?
For in-depth technical analysis of various stocks and a recap of today's Stock Trading Alert we encourage you to watch today's video.
Video Technical Breakdown is a new addition to the STA, distributed on Tuesday and Thursday along with the premium analysis, to keep you, our subscribers, well-informed with everything happening on the charts.
The S&P 500 index gained 0.47% on Monday, Oct. 25 after reaching the new record high level of 4,572.62. The stock market is reacting to quarterly corporate earnings releases. Today we will get the releases from AMD, GOOG, MSFT, tomorrow from BA, KO, EBAY and on Thursday from AMZN, among others. However, the market seems overbought in the short-term and we may see a consolidation or a downward correction in the near term.
The nearest important support level is now at 4,550 The next support level is at 4,520-4,525, marked by the last Wednesday’s daily gap up of 4,520.40-4,524.40. On the other hand, the resistance level is at around 4,600. Despite reaching new record highs, the S&P 500 remains below a very steep week-long upward trend line, as we can see on the daily chart (chart by courtesy of http://stockcharts.com):
Is a Short Position Still Justified?
Let’s take a look at the hourly chart of the S&P 500 futures contract. Last week, the market broke above its downward trend line and it broke above its previous local high of around 4,470. The nearest important resistance level is now at around 4,600.
The market seems overbought and poised for a short-term correction. Therefore, we still think that a speculative short position is justified from the risk/reward perspective. (chart by courtesy of http://tradingview.com):
Conclusion
The S&P 500 index reached the new record high of 4,572.62 yesterday and it closed 0.5% ahead of the important quarterly earnings releases. Today the main indices are expected to open 0.3-0.5% higher and we may see an attempt at another record-breaking rally. The market seems overbought in the short term and we may see a consolidation or an intraday downward correction.
We decided to open a speculative short position on Friday morning at the 4,540 price level. We are expecting a 3% correction from the current levels.
Here’s the breakdown:
- The S&P 500 has retraced all of its downward correction from the Sep. 2 local high last week and it reached new record highs.
- A speculative short position (4,540 price level) is justified from the risk/reward perspective.
- We are expecting a 3% correction from the current levels.
As always, we’ll keep you, our subscribers, well-informed.
Trading position (short-term, our opinion; levels for S&P 500 continuous futures contract): short positions with entry at 4,540 price level, with 4,630 as a stop-loss and 4,400 as a price target.
Thank you.
Paul Rejczak,
Stock Trading Strategist
Sunshine Profits: Effective Investments through Diligence and Care
