Stock market trading settled down this past week providing an opportunity to evaluate trading levels and set technical alerts for support and breakout points.
Below is a snapshot of a equity investment I follow closely.
As you can see in the chart, it has been seven days since the investment closed below the 200 day moving average (Black Line Below Price Bars). During the last 5 trading days support has been held at this line. Notice the investment has closed just above this support the last two days and at the bottom of the range of the trading range (Small Horizontal Line Across The Longer Vertical Blue & Red Lines Represents The Closing Price). Volume has been heavy (red and blue vertical bars in the section below the price) which suggest sellers were met with an equal level of buying at these prices.
The first support level for this investment is currently near the 200dma (day moving average). There is also support at the bottom the price range where this investment traded below the 200dma. It is too early to tell if we will revisit those levels again but so far buyers have been willing to come in and support a price above the 200 day line. Continued support at the current price level would suggest the worst of the selling is behind us.
Trading this last week has also provided a potential break-out price level. If the price of this investment moves above the trading level from 3 days ago, that would indicate buyers have regains some control which may indicate the worst selling from this correction is behind us, increasing the likelihood we rally into year end.
I do not expect the current situation to resolve itself quickly. I believe investors are reluctant to come into this market because so many commentators are suggesting this is the beginning of the end of this bull market. It believe they are wrong and those investors that take an overly defensive position into 2019 may be leaving money on the table.
We have two big dynamics at play that are supporting this market. A strong U.S. economy, which we have not had since the Great Recession of 2008, and a technology renaissance touching a wide variety of industries.