Rally Meets Resistance
I have to admit,
the market price action over the past few days has been exciting. Could we be
off and running to the upside? Every ounce of me (and that’s a lot of ounces)
wants to say yes. However, there are still some key price resistance decisions
to clear before I start leaning into the “buy” camp. I’ve taken the Biotech
Holders, Semiconductor Holders, and Microsoft as examples of what I am looking
at.
First, let’s
look at Microsoft
(
MSFT |
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PowerRating). It has risen more than six points over the past week.
A breathtaking move, but when I look back at recent price history, we have had
two similar rallies in January and March. Each of those rallies were to the
tune of 7.8 points. In fact, MSFT is facing a key Fibonacci price resistance
zone from 56.18 – 56.85. This price zone includes eight price levels. Failure to clear
this zone to the upside would leave MSFT vulnerable for shorts to reinstate
the longer-term down trend. However, if MSFT can clear this zone, then I believe
MSFT is in for a much higher upside corrective move at the least, and potentially
a change of trend to the upside. Regardless, the key price decision is on the
map.
Batting next
are the Biotech Holders
(
BBH |
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PowerRating). BBH is facing a key Fibonacci price resistance
decision from 97.87 – 98.96. This price zone includes six price levels. If BBH
can clear this zone, the next likely resistance zone is from 104.28 – 106.15 with
five price levels. I’m not the kind of trader that’s trying to catch the bottom.
So, for longer-term trades in BBH, I want to see it clear the top of the second
price resistance zone above 106.15. Then I’ll look to buy pullbacks into my
support zones. For now, my trend is down, and if BBH fails to clear one of these
price zones, then I’m interested in the short side of BBH.
In the number
three position, are the Semiconductor Holders
(
SMH |
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PowerRating). Since March 8, SMH has
seen lower lows and lower highs. I can see a number of rallies in that downtrend
that have ultimately rolled over. Well, the trend is still down, and we have
a large Fibonacci price resistance zone from 43.65 – 44.94 and 46.74 – 47.25. SMH
is also forming a two-step corrective pattern as it trades up into our resistance
zone. So, with a downtrend still in place, I look to trade with that trend until
price tells me otherwise. That will happen if SMH can clear the price zones
I’ve listed above. Failure to do that should create short opportunities.
Now, let’s
get back to the original question. Is this market off to the races on the upside?
Progress has definitely been made to at least challenge this downtrend. In
fact, our Fibonacci time-cycle analysis even called for at least a bounce around
the March 8 time frame. See our last article about the Dow Diamonds
(
DIA |
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PowerRating).
Bottom line: There are key price resistance zones that must be cleared in many
stocks and sectors for this market to continue on the northbound track. Failure
to clear those Fibonacci price zones will simply provide more shorting opportunities.
The possibility is there for the bulls. Now let’s see if these stocks and sectors
can rise to the occasion.