How to Play Key Levels + Market Outlook
Good evening everyone one , and welcome to another segment of stock market outlook ! In today's post we will discuss this past week's market recovery, along with key areas and things to look for that can give us signs and hint of what is to come in the following week.
In last weeks post : (https://www.truetradellc.com/post/market-outlook) we went over whether or not bears had taken control , and what would put the ball back in the the bull camp. The key area identified on /ES was off that 3857 , and down below we will review the price action and go over how important that area really was + give some insight on how you can read and play the specific chart for live plays.
In last weeks blog post, the main market sentiment was described by this post, basically previewing what was to be expected in this upcoming week:
( Blog post (https://www.truetradellc.com/post/market-outlook) )
Now the price action that followed is shown below:
/ES - hourly until 3/12
Circled chart locations (left to right)
(Blue) Futures open on 3/7 - When we opened on 3/7 , the futures opened right into that first key level, since the stock market was closed their wasn't much we could do at that momentum, but if your a futures trader, this was a great spot to go short and capitalize on a 40 + point drop. Right off that zone we rejected back to the 3817 area , and buyers started to step in. When the stock market opened, the futures were sitting around 3840, which was pretty much dead in the middle of the upside resistance and downside support. Having that overnight action in mind, my mindset was as follows, "we already rejected the 3857 overnight , and got bought off the 3817, so ideally I want to not take any trades at open and see what the market does, having a more buy the dip mindset, as other market indiscies excluding /NQ were pushing higher." AFter that we move onto the next zone.
(Blue) Rejection 3/8 - Midday we got back to the 3857 key area, but as seen on the chart above , it was chopping back and forth between the level. It took awhile but after chopping it up for a while we got back towards 3817. Say you wanted to take a short trade off the level, initially that first hourly close above 3857 would have stopped you out. But when we broke back under the 3857 , and held under for 2 consecutive hours (the last 2 candles in the blue zone (10am-12pm PST), you could've looked for the short opportunity under the 3857, while looking to go long on the hold over. The best way would be to look at a smaller time frame and look to take that shorter term scalp trade ideally using a 5 min chart , letting price action tell you whether buyers or sellers were present. Or you could have just avoided the trade and looked for the next opportunity, a buy on the dip back to support.
(Orange) Daily close 3/8 - To end the day on Monday , the market pulled back to that 3817 highlighted support. SInce we were dipping back into the support that held overnight , my mindset was to buy some dips into the close. SInce it was end of day ii did not want to go heavy in case of overnight shenanigans, so to end the day we went small size in longs. Ideally if you were trading futures you would be long, keeping your stop nder 3817 , looking for a bounce back towards 3857, and this time looking for a break.
(Green) - Rejection 3/9 - After the end of day dip on 3/8 , the market pushed higher overnight, opening just around 3860 to start the Tuesday trading session. Say you didn't take the overnight long position, since we were back over 3857, the mindset was " go long over the level". After that we pushed to the next resistance off 3898 , where sellers stepped in for a bit giving us a profit target and a potential short trade. After the rejection we still managed to close the day over 3857 , giving us a more clear sign that, yes the short term trend, is back in the upward direction !
(Blue) - Revisit breakout 3/10 - After the rejection off 3898 , we dipped back to revisit the breakout from 3857 , and as supported by the chart , we held ! The retrace and hold gave another opportunity to go long , keeping our stop loss under the level , once again targeting 3898 , while looking for a break higher this time around. After the buyers stepped in here , we pushed back towards 3898 , and started another consolidation patten , going sideways along that area for a bit. and then pushed towards our next zone at 3935 and then halted out at 3956.
(Red) - Rejection highest 4hr close 3/11 - The 3956 level was the highest 4hr close on the /ES chart, and this is where we settled off. On the first go around 3935 didn't seem to be important, but it was quite the contrary. After making that intraday high just over 3956, we phed down and closed the day back under 3935.
(Orange) - Daily close 3/11 + hold under level - After closing 3/11 under 3935, you can notice how we consolidated under it for a few hours, and pushed back down to 3898.
(Green) - Revisit breakup 3/12 - We revisited the breakup area, and just like the last revisit we held and made a push back over , pushing back to 3935.
(Orange) - Daily close 3/12 - We closed the day, and the week just under 3935, and this will remain key for the week to follow, as described in last weeks post, getting a break and hold over this was needed to make those new highs, and from the looks of rit, we should see those new highs in the upcoming week.
Hope this helped decipher some chart reading/ level trading questions, if you have any other questions, drop them down below !!!
Now to get into the following week's outlook. The market is back in short term control by the bulls. The Dow is leading the upside, while Tech continues to trail, and S&P is in that middle ground, looking to get to new highs. So here are some key /ES levels to follow for the upcoming week.
/ES - DAILY UNTIL 4;30 PST 3/14
UPSIDE:
- 3935.75 (Around 393.96 SPY) - Opening and holding over this level would get us the first set of momentum we need to continue pushing higher. If we fail to hold over here, pay attention to some of the downside levels to take for support, long trades.
- 3956 (Around 395.6 SPY) - Shouldn't really act as resistance this time around , as we already sold off here initially, probably just a good profit taking target. Just keep the area in mind , watch it , but should get a break to new highs on the nxt move up.
- NEW HIGHS - Not sure how high we could head, but the big round number off 400 would seem a likely target for bulls on the upside, again no guarantee we get their but keep your eye out for it.
DOWNSIDE:
- 3898 (Around 390 SPY) - Possible we revisit this area again this week , but not likely unless we open under 3935 on market open 3/15. Keep in mind for n area for some dip buys for now.
- 3857 (Around 385.8) - Doubt we revisit this level this week , but good spot to keep the bull/bear case for now, as long as hold over here, bulls will remain in control.
(As of 4:30 PST , /ES is over that 3935 and holding is , so should see upside to follow , will update in tonight's market watchlist)
Next we have the DOW , NASDAQ and VIX:
/YM - Daily until 4:30 PST 3/14
The Dow continues to lead to the upside, basically going straight up since that ealy week pullback on 3/8. It has built a bit of basing and support off 32356 (323.33 $DIA) on its way up , and should hold that on a retrace. If we have a sell sometime late in the week , we could see a retest of around 31935 (around 319.53 on $DIA). As stated in last week's post, stocks in this sector will have much more upside pushes, since its been on a heavy breakout, and dips bought in this sector flourished all last week. Market trend is up, with the dow leading, so continue to keep you eyes on on DOW stocks for great movement !
On the other hand we have /NQ :
/NQ - DAILY UNTIL 4:30 PST 3/14
We had a pretty decent up move from the lows last week , reclearing 12683 , but we had a nice pullback to end the. week on 3/12. The following week , we should just base out a bit before trying to break out again. Some key areas to watch on QQQ will be as follows;
$QQQ - Hourly until 3/12
310 will be the support to hold, the line in the sand, as long as tech holds here, it is more likely to continue back to the upside. While 318 is the next closest resistance, we tried to break on 3/11 , but we break back under to close , and retested 310. If we get that break 318 , we will likely see that 326 shortly after. Since tech is the lagging sector, if we get that break over 318, look for some hot tech stocks to rebound drastically into the following week (some will be posted in tonight's watchlist 😉)
Lastly we have VIX:
$VIX - DAILY UNTIL 3/12
There's not much to say for this one , we basically closed back towards the lows, while the market continues to push higher. No divergences this time around , so we should see some smooth sailing back to new highs 😆.
Final words:
The market is back in bull territory. Nothing in the market gives any signs of weakness for now, so continue to play the trend and buy some dips. As always i will try to keep you guys update throughout the week via instagramg and potentially twitter, and I will try to have a midweek update to help those reading at home follow along. I'll have my eyes on tech stocks if we can clear that 318 , and will pinpoint some i like in tonight's watchlist. Other than that, as always,keep a level headed mind, keep out the bias, and let price action tell you what is the best play to take !!!
(Remember, even if you don't trade futures or ETFs such as SPY , QQQ , you can still utilize the futures, and these indices to help you decipher market sentiment, and allow you to see the trend of the market, while giving you signs of relative weakness/strength to see which side would be best to trade for that day whether it be long or short. The same strategies used above can be used on any stock, and the principles of price action apply to them all. Use it as a blueprint , and you will slowly but surely become a better trader.)
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What stocks will you watch for the upcoming week? Do you think tech will recover ?