Wednesday, April 8, 2019 after close
Broader market price action has unfolded almost exactly as I described two weeks ago on March 26th..
“The Dow proxy ETF (DIA) chart shows what a recovery would look like. I’m looking for price to hit overhead resistance (circle) soon and get slammed down (reflective) to around 210 where I would look for another reversal and leg up into a higher resistance level. Short term, I would like to see higher highs and higher lows until we get up around 250 where it would be more likely to see a sell off back to near 224. This will all be easier to measure with a completion of this first leg higher.”
Here is the chart of DIA I shared with you on March 26th with my price projections in white. BEFORE
Here is today’s (4/8/20) chart. You can clearly see price has followed my price projection track to the exact reversal days and virtually the exact reversal prices. AFTER
The bottoming and rebound trajectory I described here on March 23rd at the extreme low has turned out to be one for the history books..so far. I wrote..
“This presents us with long term asymmetrical risk/reward opportunities. When price defaults to these long term levels you can bet big buyers are paying attention and beginning to incrementally step in. There is a clear defined risk under such critical support and unlimited reward above. Low risk/high reward entries are always associated with price trading down into these important inflective price levels.”
If you took advantage of these levels congratulations! I know some of you bought Boeing (BA) after reading my commentary and made a lot of money. Well done. These historic reversal levels are extremely difficult to buy but the risk/reward is so skewed in our favor that we must pay attention to these levels.
So, now what?
Short term: Caution
The broader market has recovered almost half of the decline from the February highs. This is a very common reversal zone and I would exercise extreme caution here. I have drawn in a red horizontal line at this level on the DIA chart. This is only 400
Dow points from today’s close which can happen in two minutes.
Remember, the Dow has surged 6,000 points from the March 23rd low and a consolidation reversal at the 50% level would be probable.
Intermediate term: Choppy
It’s always extremely difficult to project what price might do, especially during a global health crisis and the resulting economic disruption. With that said, I would be surprised to see broader market prices lower than the March 23rd low for years to come based on current data barring any new horrific coronavirus infection rates. At the very least, the March 23rd bottom represents a defined risk floor to trade from. The asymmetrical risk/reward this level represents is historic.
So, taking profits or trimming positions at current levels is prudent and can provide for future buying power if we get a reversal lower from Dow 23,800 which is only 400 points above today’s close. The quick rebound trajectory to the midline has been reflective of the initial drop and there is now a high probability of another reversal down to around 21,000/22,000.
I’m happy to answer any questions.