Combining Technical Indicators with S/R Levels
Navigating Momentum and Reversals for the SPX, Indices, ETFs and Megacaps
Over the last few days, we have seen very rapid moves in extended hours (after or before the market opens) following earnings reports on both the bullish and bearish sides, not to mention pre-market shifts driven by developments in the conflict in Iran. Regardless of whether the situation is bullish or bearish, sharp reversals are occurring. Today, this publication focuses on educational content about how to combine support and resistance levels with other technical indicators.
The key question when using levels is: How to anticipate whether a level will act as a reversal zone?
Last Friday, the support and resistance levels for this week included educational content on setting a hierarchy of monthly, weekly, and daily levels, along with preliminary considerations for combining them. Today, I have updated charts illustrating reversals that occurred right at the market open, reversing extreme moves.
The S/R Levels mentioned above for this week are here:
When NFLX posted its earnings, I anticipated that chasing that bearish move with shorts was extremely risky and that a (bullish) reversal could happen. I indicated my preferred timeframe to anticipate this kind of move following extreme premarket overextensions, and the reversal played out as expected with the stock jumping at the open from 65 to 69 for a +6% move 🎯. The same thing happened with GOOG and META, both bouncing following the post-earnings reports selloffs. Technical analysis anticipated that chasing those moves after earnings were highly risky as documented. Today, we are going to study those patterns, alongside reversals to the downside, which is what we have seen with AMZN with a cumulated -5% move since my bearish warning on Monday 🎯.
Today’s edition focuses on educational content on reversal zones because support and resistance levels are areas where institutional algorithms react. We saw this in action this week, for example, with the S&P 500 facing rejection at 7,761 (a pre-modeled weekly level) and the QQQ facing rejection at 726.2 (a monthly level updated last Friday). Similarly, once GOOG reached its bullish target of 381 in confluence with the monthly target of 382, that zone printed a reversal area that triggered the bearish engulfing candle we saw today. It is interesting to observe with these three tickers how accurately support and resistance levels mark the zones where institutional algorithms react. Now let’s study when the levels are likely to become reversal zones, and when they can flip from resistance to support or vice-versa.
Remember that when you become a paid subscriber, you unlock my two ebooks on technical analysis, they can be found in my educational library:
Today’s Agenda:
Combining S/R levels with Bollinger Bands: Case studies on NFLX, META, and TSLA.
Daily SPX Plan and Levels for Thursday, August 6th. Technical chart.
Technical Analysis for QQQ, GLD, SMH, AVGO, and NVDA, alongside commentary on GOOG, AAPL, and other megacaps.
Daily Levels for Tomorrow: SPX, SMH, NVDA, PLTR, SPCX, AVGO, LLY, AMD, MU, TSM, SHOP, MELI, UBER, and APP.
Let’s begin,
Anticipating Reversals: How to Avoid Getting Squeezed
The recent cases for NFLX, META, and TSLA provide good vivid examples: