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In this article, we examine the significant weekly order flow and market structure developments driving XLK’s price action.
The highest probability path for this week was for price discovery lower following the development of sell excess last week within this year’s major supply cluster, 79.70s-77.68s. The primary expectation did play out as minor price discovery lower developed early week to 76.93s where selling interest trapped, driving price higher to 78.40s before balance developed ahead of Friday’s close, settling at 78.04s.
24-28 June 2019
This week’s auction saw buyers trap, 78.63s-78.46s, in Monday’s auction as last week’s sell excess held as resistance. Price discovery lower developed in Tuesday’s trade, achieving the weekly stopping point low, 76.93s, as sellers trapped into Tuesday’s close. Tuesday’s late sellers failed to hold the auction as Wednesday’s trade opened at 77.77s.
Price discovery higher developed, achieving a stopping point, 78.39s, where minor sell excess developed. Narrow, two-sided trade developed through Wednesday’s and Thursday’s auctions, 78.39s-77.80s, ahead of Friday’s close, where both large buyers and sellers emerged, settling at 78.04s.
NinjaTrader
This week’s auction saw minor price discovery lower to 76.93s where sellers trapped and balance then ensued below key supply into week’s end. Within the larger context, the relief rally from 70s to 79.22s likely has terminated amidst a larger corrective pattern.
Looking ahead, the focus into next week’s auction will center upon market response to this week’s key balance cluster, 78.39s-77.80s. Buy-side failure at this cluster would target key demand clusters below, 76.50s-75.75s/74s-73s, respectively. Alternatively, sell-side failure to hold at this cluster would target key supply clusters above, 79.25s-79.70s/new all-time highs, respectively. From a structural perspective, the highest probability path is sell-side within the context of an incomplete corrective phase. Within this near-term context, the intermediate term (3-6 month) bias remains neutral with the stopping point high development 79.72s and subsequent corrective phase. Price discovery lower could continue toward 68.84s/64s within the larger context of a neutral bias.
It is worth noting that sentiment based on the S&P Technology Sector Bullish Percent Index has seen both substantial decline in bullish sentiment following the dramatic rise in bullish sentiment from January 2019 through June 2019. Stocks more broadly, as viewed via the NYSE, are now exhibiting a similar decline in bullish sentiment, albeit more muted. Asymmetric opportunity develops when the market exhibits extreme bullish or bearish sentiment with structural confirmation. The data reveals such opportunities both on the buy side and sell side in January and April 2019, respectively. Recent caution regarding further buy-side potential for technology shares as price diverged with sentiment was justified. As sentiment again reaches bullish extreme, buy-side caution is warranted.
StockCharts
The market structure, order flow, and sentiment posture will provide the empirical evidence needed to observe where asymmetric opportunity resides.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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