Technician’s Edge: XLF Key Support

Dec 9, 2009: 2:37 PM CST

I wanted to highlight a new column I’ve been thrilled to be selected to write as a contributing expert to the GreenFaucet.com Financial Website – it’s called the “Technician’s Edge” and I wanted to make that announcement and draw your attention to some additional brief analysis posts I’ll be writing a few times each week.

The Technician’s Edge Column will focus not so much on educational topics and daily (or intraday) analysis which are the focus of the Afraid to Trade blog here, but will highlight key developments or quick comments of key markets, stocks, or indexes.

It will also allow me to flex my technical muscles a bit and slip in a few advanced methods from time to time that have been received favorably here from readers of the blog.

I will keep you posted when new articles are available.

Today’s post focuses on the Daily and Weekly chart of the XLF – Financial AMEX Sector SPDR as I highlight a key support area – the $14.00 zone – to watch closely in the days and perhaps week ahead.

The level reflects support from the convergence of the 20 and 50 week exponential moving averages along with prior price support at the $14.00 area and the 38.2% Fibonacci retracement from the July lows.

Here is a look at the current daily chart of the XLF:

Quick comments:

Watch out for the possibility of a Head and Shoulders forming, which would be confirmed with a break beneath $14.00.

Watch out also for a similar reversal ‘topping’ structure – that of the Rounded Reversal or “Price Arc” that also appears to be forming.

Like the S&P 500, negative momentum and volume divergences are forming… which hasn’t produced a turn-about yet.

A break under $13.75 would be a major sell signal that should be followed very closely.

Be careful with all these storm clouds gathering on the horizon!

Corey Rosenbloom, CMT

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

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