Looking Around For Edge
Sometimes the best trades
require that you put the pieces together by broadening your perspective. Quite
often you’ll find that the best looking pattern might belong to a sector or
index that might not be testing a critical level, at least at first glance. By
keeping tabs on the big picture, such as what is happening in the broader
indices, you just might find more than enough evidence to support the classic
reversal pattern in the sector of your choice.
10:44:03
Intraday
Sector Strength
The semiconductor sector (SMH)
is holding around the unchanged mark after forming an intraday 1,2,3
pattern. The sector has pulled back 10% from recent highs, as it has been the
hardest hit, within the top performing sectors. The SMH might be one to watch
for further leadership as the broader market, represented by the S&P 500 (SPY),
tests a zone comprised of the 50-Day EMA and a 50% Fibonacci retracement from
the August pivot lows.
It should be noted that the 10% pullback from
highs is a significant level to many technicians, as a level of key support
within an established uptrend. So while there was no Fibonacci evidence for
support in the SMH, the percentage pullback itself was a high-probability area
for reversal patterns to set up from.
So while support for the
high-probability pattern might appear elusive, there was actually solid,
concrete evidence for a nice foundation to be laid down at session lows.
Chris Tyler