June 26, 2019
By Mish Schneider
Micron (MU) delivered better than expected earnings news, which pushed it up 13% higher and lifted SMH by 2.7%.
This created a pattern that often leads to a resumption of bull trends.
This puts SMH within range of a nice bullish breakout.
However, outside of select tech and the semiconductors, the market was not as enthusiastic.
The bullish continuation pattern in SMH is a big down day, followed by a gap the very next day above the prior day high that closes strong relative to its daily range.
Visually this should look like a big red candle followed by a green candle that gapped over the red candle’s high.
SMH is a good example of the this with one minor disappointment in its lack of ability to close closer to the Wednesday high.
When this pattern occurs in bullish trends, it often indicates then end of consolidation or the end of a correction.
If the pattern is good, the market should hold the bullish day’s low (today’s low).
Since the current pattern sits right under significant longer-term resistance from 109-110, the best way to use this would be to wait for a break over 110 to get bullish.
The other reason for tempered enthusiasm is that the SMH was the only Modern Family member to change its mood.
In fact, IWM closed at new lows for its move over the last week.
So SMH may be a source of hope, it’s too early to say the market is ready to change its mood.
Watch 110 and 107.80 closely in SMH.
Best wishes for your trading,
Mish is still recovering from back surgery so Geoff is filling in temporarily
S&P 500 (SPY) Key support areas are 290 and 287.80 which is price level and 50-DMA. Resistance at 292.80.
Russell 2000 (IWM) Still weak. Needs to close over 153.50 to show strength. The next big level to hold is 148.50.
Dow (DIA) Inside day. Until a close over 268 look out for more weakness. 264 may offer support, but the bigger number is 263.
Nasdaq (QQQ) Inside day with interesting low around 185..50 support. Needs to break over 188 resistance. 183.80 is support and 50-DMA.
KRE (Regional Banks) Nice recovery from 51 support. Overhead resistance at 52.50-53.00.
SMH (Semiconductors) Big up day with highest close of the month and move off its May lows. Unconfirmed Bull Phase but should clear 108.50 before getting too bullish. Should find support at 107.80 and then 106.80.
IYT (Transportation) Inside day. If it clears 184 it may bounce. Needs to 190 to look good. 181.40 then 180 are the next support levels to hold
IBB (Biotechnology) Broke below 10-DMA. Held area of support around 105.50. Needs to clear 110 to be bullish, but if it clears 107 it starts to get interesting.
XRT (Retail) Needs to clear pivotal 42 level. 41.30 and 41.00 are significant support.
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