Although we've had a choppy week in the market, key areas held in the major indices, showing upside potential for Monday. Currently, the main support levels are near the 50-day moving average (blue line) in the Dow Jones (DIA), Russell 2000 (IWM), Nasdaq 100 (QQQ) and the S&P 500 (SPY). If these support areas can hold, we can next watch for resistance areas to clear.
The most important resistance level to clear is in the Russell 2000 (IWM). Not only does IWM have a large sample size of companies compared to the other major indexes, last week's high at $208.79 lines up with the high from 2/10. As seen in the above chart, this makes an important level to clear if the market is going to show strength next week. On the other hand, DIA and the QQQ have resistance from their 200-DMA (green line). Lastly, since the SPY has already cleared its major moving averages, its most notable resistance level is the double peak high at $458.
With that said, here are two trading ideas to watch for in the coming week.
The first is Invesco Water Res ETF (PHO). Water is a safety play based on rising inflation and food shortages brought by supply chain disruptions. PHO is sitting over its 50-DMA in a recuperation phase and, if it can hold over the MA at $52.14, it has the potential to make a run towards $56. One key level to clear and hold over is $53.65.
Flipping over to momentum play, Check Point Software (CHKP) is a technology company focused on security and internet bandwidth management. More susceptible to overall market price action, CHKP needs to be watched along with major indices either clearing resistance or holding support areas. Having just cleared over resistance from $141, CHKP should hold over this level and ideally not close under its 10-DMA at $138.
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With big moves this week with AMC and GameStop propelled by the Reddit crowd, meme stocks have come back into popularity with retail investors. On this week's edition of StockCharts TV's Mish's Market Minute, Mish takes a look at hot meme stocks and gives actionable information.
ETF Summary
- S&P 500 (SPY): Resistance 458.
- Russell 2000 (IWM): 209 to clear.
- Dow (DIA): 350 resistance.
- Nasdaq (QQQ): 350 to hold. 368 to clear.
- KRE (Regional Banks): 69.28 the 200-DMA.
- SMH (Semiconductors): 273.95 pivotal.
- IYT (Transportation): 270.60 resistance.
- IBB (Biotechnology): Flirting with the 50-DMA at 128.06.
- XRT (Retail): 75.62 support area.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
