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by Arthur Hill
The S&P 100 came down hard in May, but managed to find support at a prior resistance zone. Meanwhile, the battle for 580 is still raging.
Position: Hold
Arthur Hill
Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.
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SUPPORT & RESISTANCE
OEX Battles 580
05/31/06 08:15:10 AMby Arthur Hill
The S&P 100 came down hard in May, but managed to find support at a prior resistance zone. Meanwhile, the battle for 580 is still raging.
Position: Hold
| Broken resistance (support) turns into support (resistance). This key tenet of technical analysis is bearing fruit on the Standard & Poor's 100 chart (Figure 1). The stock surged in October–November 2005 and then began a volatile consolidation around 580. This consolidation lasted three to four months and the index crossed 580 over a dozen times (gray box). Talk about a battle zone! |
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| FIGURE 1: S&P 100. Broken resistance turns into support, as this chart shows. |
| Graphic provided by: MetaStock. |
| Graphic provided by: MS QuoteCenter. |
| |
| The bulls appeared to win with the breakout in March, then moved to new highs in May. In addition, the 580 level turned into support in mid-April as the index formed a reaction low at 580.63 on April 17. This further affirmed support, and the move to new highs was bullish. |
| There is only one small problem: The May move to new highs failed, and currently, the index is once again wallowing around support at 580. OEX broke the March and April lows. I find this bearish but cannot ignore the support zone around 580. The index traded around this level from late November to early March, and this area should offer support. |
| What now? Given the support zone and key support at 568, I would expect some consolidation in this area—again. In fact, a consolidation between 568 and 590 would form the right side of a head & shoulders pattern. This would further reinforce support at 568. Right now, support at 568 is holding and I will key off this level for a trend change. A move below this level would forge new lows for 2006 and turn the daily chart/trend bearish. |
Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.
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Date: 05/31/06Rank: 4Comment:
Date: 06/01/06Rank: 5Comment:
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