Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Why Most Investors LOST Money by Investing in ARK FUNDS - 27th Jan 22
The “play-to-earn” trend taking the crypto world by storm - 27th Jan 22
Quantum AI Stocks Investing Priority - 26th Jan 22
Is Everyone Going To Be Right About This Stocks Bear Market?- 26th Jan 22
Stock Market Glass Half Empty or Half Full? - 26th Jan 22
Stock Market Quoted As Saying 'The Reports Of My Demise Are Greatly Exaggerated' - 26th Jan 22
The Synthetic Dividend Option To Generate Profits - 26th Jan 22
The Beginner's Guide to Credit Repair - 26th Jan 22
AI Tech Stocks State Going into the CRASH and Capitalising on the Metaverse - 25th Jan 22
Stock Market Relief Rally, Maybe? - 25th Jan 22
Why Gold’s Latest Rally Is Nothing to Get Excited About - 25th Jan 22
Gold Slides and Rebounds in 2022 - 25th Jan 22
Gold; a stellar picture - 25th Jan 22
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

February 2020 COVID Breakdown Gap Acting As Support For Stock Market Rally

Stock-Markets / Stock Markets 2020 Dec 15, 2020 - 06:02 PM GMT

By: Chris_Vermeulen

Stock-Markets

The difference in the price setup of the initial February COVID-19 downside price gap on the INDU (Dow Jones Industrial Average) vs. the SPY (SPDR S&P500 ETF) clearly shows how this previous gap in price is acting as a critical support level for the current price rally.  When the downside price gap first started, near February 25th, 2020, technical traders immediately identified this “impulse gap” as an important price structure to watch in the future.  As the US stock markets recovered in late August/September, price levels began to attempt to “fill the gap” on the INDU chart.  On the SPY chart in August/September, prices filled the gap then rallied to new highs – initiating a new upside price rally attempt.

My team and I believe these gap levels on the INDU and SPY currently represent a critical horizontal support level for both the INDU and the SPY.  This gap range is now acting like a “hard floor” in price that should be watched by all traders. We will examine these setups on the charts below.


INDU WEEKLY HARD SUPPORT FLOOR SETUP

The Weekly INDU chart, below, highlights the gap range with a shaded GOLD rectangle.  You should be able to clearly see the multiple peaks in late August 2020 and early October 2020 that confirmed this gap range was acting as resistance. Then, just after the US elections, the INDU price gapped higher, above the GOLD gap range, and began to rally.  This breakout upside gap in price changed the GOLD gap range from resistance to support.  My research team believes the GOLD gap range has now become a solid hard floor support level between 28,400 and 28,850.

As long as price continues to rally above this level and fails to breakdown below this range, then the bullish price trend should continue.  This prior gap range has become a critical level in price structure going forward.  What was resistance has now become major support.

Be sure to sign up for our free market trend analysis and signals now so you don’t miss our next special report!

We have also highlighted the RSI trends, near the bottom of these charts, to show you how defined the uptrend is in relationship to moderate market rotation.  Other than the early November dip in the RSI, the continued upside strength we’ve seen since April 2020 has shown very little real rotation in price. Now that we’ve cleared the “all-time high” benchmark again, we expect to see some broader market price rotation in the future – which is why the gap range critical support level becomes important.

SPY WEEKLY HARD SUPPORT FLOOR SETUP

A similar price pattern has set up on the SPY, although with slight differences in price structure.  The initial downside price gap from the COVID-19 collapse set up a very clear initial gap, highlighted again with a shaded GOLD rectangle on the chart below.  This downside price gap created an immediate resistance zone as price continued to decline.  While price recovered, we can see how price moved above the gap range in August 2020, then began to rotate sideways.  Throughout this span of about 90 days, the gap range was retested twice, in September and October – reconfirming the gap range level was acting as strong support.

What we find interesting is that the SPY chart shows price levels had already cleared the gap range and started confirming the critical support level well before the INDU price level attempted to move above the gap range.  This suggests the broader S&P500 presented a stronger upside price bias than the INDU  – as the S&P includes 500 symbols and the Dow Jones include only 30 symbols. 

At this point, the SPY has rallied a little over 10.4% above the upper level of the gap range whereas the INDU has only rallied about 4.25% above the gap range. If a broad market bullish trend continues, the SPY may outperform the INDU by a 2:1 ratio if the current price ratio continues.

In closing, it is important to understand how these gaps work as critical targets as well as critical support and resistance levels.  Right now, these gap ranges are acting as a very important hard support floor for price.  As long as price does not breach these levels, expect the bullish trend to continue.

As we move closer to closing out 2020, traders should prepare for increased volatility in 2021 and the potential for broader market trends.  2021 looks to be a traders market in our opinion.  Our research continues to show owning the best-performing assets while avoiding risks is key to long-term success.  Visit www.TheTechnicalTraders.com to learn how our Best Asset Now strategy is essential for traders/investors that want to attempt to outperform the markets.

Chris Vermeulen
www.TheTechnicalTraders.com

Chris Vermeulen has been involved in the markets since 1997 and is the founder of Technical Traders Ltd. He is an internationally recognized technical analyst, trader, and is the author of the book: 7 Steps to Win With Logic

Through years of research, trading and helping individual traders around the world. He learned that many traders have great trading ideas, but they lack one thing, they struggle to execute trades in a systematic way for consistent results. Chris helps educate traders with a three-hour video course that can change your trading results for the better.

His mission is to help his clients boost their trading performance while reducing market exposure and portfolio volatility.

He is a regular speaker on HoweStreet.com, and the FinancialSurvivorNetwork radio shows. Chris was also featured on the cover of AmalgaTrader Magazine, and contributes articles to several leading financial hubs like MarketOracle.co.uk

Disclaimer: Nothing in this report should be construed as a solicitation to buy or sell any securities mentioned. Technical Traders Ltd., its owners and the author of this report are not registered broker-dealers or financial advisors. Before investing in any securities, you should consult with your financial advisor and a registered broker-dealer. Never make an investment based solely on what you read in an online or printed report, including this report, especially if the investment involves a small, thinly-traded company that isn’t well known. Technical Traders Ltd. and the author of this report has been paid by Cardiff Energy Corp. In addition, the author owns shares of Cardiff Energy Corp. and would also benefit from volume and price appreciation of its stock. The information provided here within should not be construed as a financial analysis but rather as an advertisement. The author’s views and opinions regarding the companies featured in reports are his own views and are based on information that he has researched independently and has received, which the author assumes to be reliable. Technical Traders Ltd. and the author of this report do not guarantee the accuracy, completeness, or usefulness of any content of this report, nor its fitness for any particular purpose. Lastly, the author does not guarantee that any of the companies mentioned in the reports will perform as expected, and any comparisons made to other companies may not be valid or come into effect.

Chris Vermeulen Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in