The S&P MidCap SPDR (MDY) fell to broken resistance with a gap down on Tuesday, firmed on Wednesday and gapped up on Thursday morning. The two gaps created a price "island" on Tuesday-Wednesday and an island reversal over the last four days. Notice that this island reversal also marks a bounce off first support (from broken resistance). As a short-term pattern or reversal, Thursday's gap must hold to keep it valid. A move below 270 would fill the gap and negate this reversal pattern. Also notice that MDY hit a new high just three weeks ago and shows relative strength as the price relative hit a seven month high this week.
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About the author:
Arthur Hill, CMT, is the Chief Technical Strategist at TrendInvestorPro.com. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London.
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