It broke downtrend resistance at $39 on heavy volume and closed just below the all-important $39.50. We mentioned these two numbers in yesterday’s report. Moving over $39 should be considered a breakout and bears have their backs against the wall here as money that has been sidelined for months is starting to come in. Investors are starting to get worried that they are going to miss a 4th quarter rally, as well they should.
The real test is yet to come however. $39.50 represents resistance drawn from October 2004’s peak (see weekly chart above). In fact, this basic level has represented overhead supply (resistance) since January of 2004. A strong break above $39.50 would put us into a new bullish era that could last for a couple of years. More importantly, it would take us out of the grueling trading range that for the past year and a half has made it very difficult to take money out of the market and that has led to periods of trading account draw downs. A sustained move over $39.50 would be significant indeed.
What has been holding back a tech break out? The weak semiconductor sector has. Take a look at the SMH chart below and notice the very strong bounce off its long term uptrend. This sector is ready to rally in the 4th quarter and we should see some nice gains to the upside starting from this move.
No comments:
Post a Comment