Price Headley's Daily TrendWatch
Key Support Levels
June 24, 2003
It seems investors have become much more nervous over the last few days, and for good
reason. For example, on Monday the Nasdaq gave us our third consecutive day of big
losses, and our fifth consecitive day of a lower intra-day low. In fact, yesterday
may have been the most worrisome day of the three, as we crossed under both the 10
and 20 day exponential moving averages. We don't want to sound the alarm bells just
yet, but it wouldn't hurt to start looking at key price levels if this market
pullback materializes.
The 10 day exponential moving average has definitely been the line to watch over the
last two months, as we've found support there frequently during this upturn. That is,
we found support there until yesterday. On our chart we've plotted the 10 day EMA in
red, and the 20 day EMA in blue. That 20 day EMA was our second line of defense, but
it also failed to act as support. The last line of support is the intermediate-term
support line (dashed). We've found support there three times since March, and perhaps
we will find it again. On Tuesday that support line will be around 1580, but you will
need to adjust that level slightly higher as time passes by. Obviously with the
Nasdaq closing at 1620 on Monday, there's still a little cushion left. This is why
we're not yet overly nervous - we've made a similar pattern twice over the last few
weeks and survived them both by finding support at the intermediate-term trend line.
If we get a couple of closes under that line, then we may see some significant
downside.
Nasdaq Composite Chart - Daily
And just where might we land if this pullback does fall into place? One of the more
likely levels is the 200 day simple moving average (in green). As you may be aware,
the 200 day SMA is regarded as one of the most significant technical lines. While
crossing it in March was monumental, we haven't yet tested it as support. In other
words, to confirm that this upturn has any staying power, we really need to find
support at the 200 day SMA. So in some respects, a decline in the Nasdaq Composite
may be a necessary evil to verify the conviction of the bulls. In any case, if/when
we hit the 200 day line, that would be an ideal time to reassess your positions.
While it's still unclear whether we'll bounce up off of it or tumble below the 200
day SMA, it's very likely that stocks will do one or the other at a very brisk pace.
Again, we don't intend to incite a panic, as we still have some support lines
unbreached (in fact, stock futures are higher as of the time of this writing).
However, even though we're hoping for the best, it's prudent to plan ahead, since
surprise sell-offs can skew your judgement.
Se não receio o erro é porque estou sempre pronto a corrigi-lo
There's no bull side and no bear side. JUST THE RIGHT SIDE!
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