Last week’s bearish price action caused the main stock market indexes to plunge through major levels of technical price support, including key moving averages and prior “swing lows.” Now, those technical levels of prior price support will act as the new levels of price resistance on any rally attempt. This is because the most basic tenet of technical analysis is that a prior level of support always becomes the new level of resistance, after support is broken (and vice versa).
Since last week concluded with a modest rally attempt on November 9, it may have been the start of a significant counter-trend bounce. However, with an abundance of overhead supply now in the broad market, it would not be long before benchmark indexes such as the S&P 500 ($SPX) and Nasdaq Composite ($COMPQ) start running into new overhead resistance levels that could easily stall any decent rally attempt.
In the 3-minute stock trading strategy video below, we use simple and objective technical analysis to highlight pivotal price levels where both the S&P and Nasdaq could run out of gas in the near-term if stocks start bouncing higher in the coming week. Press the “play” button on the video player below to watch this short technical analysis video (click icon on bottom right side of player window to view in full screen):
If you use direct access stock trading software, it may be a good idea to set price alerts for the S&P 500 and Nasdaq Composite at the resistance levels mentioned in the video. Doing so will enable you to be instantly notified when the broad market inevitably enters into a counter-trend bounce and eventually starts bumping into technical resistance levels that will likely be difficult for the broad market to overcome in the short-term.
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