Key price levels are points where buying and selling are most likely to take place. With over 40 years of back tested data, I have defined these key price levels as a pivot point low occurring at a time when investor sentiment is bearish (i.e, bull signal). These key areas are shown with the red dots in figure 1, a weekly chart of the ETF proxy for the S&P500, the S&P Deposit Receipts (symbol: SPY). The trend channel has been broken. While the SPY has found support for now, I still contend that a better buying opportunity is ahead.
Figure 1. SPY/ weekly
A weekly chart of the Diamond Trusts (symbol: DIA) is shown in figure 2. DIA is stuck in "no man's land". It is neither at support nor resistance.
Figure 2. DIA/ weekly
Figure 3 is a weekly chart of the Power Shares QQQ Trust (symbol: QQQQ). Like SPY, QQQQ has fallen out of its trend channel.
Figure 3. QQQQ/ weekly
Figure 4 is a weekly chart of the i-Shares Russell 2000 Index (symbol: IWM). Looking at the oval at the right hand side of the chart, we note the breakout from the down sloping trend channel that failed at the 62.86 level; 57.80 seems like a better place to buy as this is the confluence of a key support level and the rising 40 week moving average.
Figure 4. IWM/ weekly
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