Monday’s Levels
Technical Analysis and Trading Strategy
By Mark Melin, technical analyst
Monday, July 26
Monday Recap: In our prediction
for Monday, we said that cash Dow would touch both sides of the flat line. That
occurred. Further, we said that the 9900 level would provide a point of support
and in the chart posted yesterday (posted below) we highlighted 10,000 as a
resistance point. Those points were pretty much accurate, as the cash Dow
started the day higher near 10,000. From here the Dow moved lower, getting as
low as 9913 before finding buyers to move the market’s measure higher to trade
in a coil fashion for the balance of the day before ending near where we
started, closing at 9962, down a fraction on the day.Â
Charts from
www.stockcharts.com
For its part, the S+P tested the support region
we had identified in our Monday morning prediction (yesterday’s chart below).Â
This is an important test and may hold the key to the entire market.Â
Prediction for Tuesday. We
could see an attempt to firm on Tuesday.Â
On the upside for the cash Dow we’ll keep an eye on the 10,000 level. If we
break and hold this level we could see a move to the 10,050 level – and above.Â
On the downside we’ll watch the 9900 to 9850 level. On the S+P we’ll again
watch important support at the may lows. If this level is broken we could see
all markets tank lower. We also need to keep an eye on the oil market. If we
move much higher we could see some dramatic selling in stocks.
Portfolio Strategy:Â Right now we are flat
looking for the next set-up. We’re going to watch the set-up this morning and
may potentially put on a vertical bull call spread.
Current Portfolio Status:
Flat, no position
Â
For questions e-mail,
subscriptions@dowoptionstrader.com
Trading Method:Â Mark Melin strategically
short sells options and then directionally trades within this short options
portfolio, always hedging one position against another to generate consistent
profits.