Resistance to Hold or Break on SP500 Daily Feb 16
Feb 16, 2010: 1:32 PM CSTI wanted to do a quick update showing the key resistance level at 1,100 that either will hold as an overhead sell signal, or break as buyers continue pushing prices higher, triggering a “popped stops” rally if they can move the index above 1,100.
Let’s see this on two quick daily charts:
We see that price bounced off the 38.2% Fibonacci retracement taken from the July 2009 low to the January 2010 high, forming a long lower shadow hammer/doji candle.
We’ve been in retracement mode since, as price has rallied today to test the 20 and 50 day EMA – which is currently in a bearish orientation.
The $64,000 question remains:
“Will price break above resistance, thwarting the short sellers one more time (as in early November) or will this time resistance hold and send prices lower?”
The 1,100 level reflects at least three confluence methods that – if broken – should lead to a rally higher – perhaps back to 1,150 – in classic “Popped Stops” (short squeeze) fashion. However, if sellers step up here, we could look for a move back to 1,050.
1,150 or 1,050 … depends on what happens at 1,100.
Here is a “zoomed in” view, showing the following convergences:
50 day EMA: 1,097
50.0% Fibonacci Retracement: 1,097
“Psychological” Round Number Resistance: 1,100
It’s probably a good idea to have a trading contingency plan in place for whatever happens at this “Line in the Sand” between bulls and bears.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
