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In this article, we examine the significant weekly order flow and market structure developments driving XLK price action.
As noted in last week’s XLK Weekly, the highest probability path for this week was for price discovery lower within the context of an incomplete corrective phase from 82.78s. The primary expectation did not play out as balance development unfolded above last week’s key demand before price discovery higher to 80.17s occurred, ahead of Friday’s close, settling at 79.53s.
NinjaTrader
26-30 August 2019:
This week’s auction saw price discovery higher in Monday’s auction from last Friday’s buy excess to 78.27s. A gap higher open developed in Tuesday’s trade, achieving a stopping point, 78.12s. Minor structural sell excess emerged, driving price lower to 77.67s ahead of Tuesday’s close.
Price discovery lower continued early into Wednesday’s trade, achieving the weekly stopping point low, 77.14s. Structural buy excess developed there as sellers trapped, 77.49s. Minor price discovery higher developed to 78.32s into Wednesday’s close. A gap higher open developed in Thursday’s trade before price discovery higher developed to 79.79s. Buying interest emerged, 79.52s, into Thursday’s close. Price discovery higher developed early in Friday’s auction, achieving the weekly stopping point high, 80.17s, within key supply overhead. Sell excess developed there, driving price lower in retracement to 78.96s ahead of Friday’s close, settling at 79.53s.
NinjaTrader
This week’s auction saw balance development early week above last week’s support before price discovery higher developed to 80.17s, within near-term key supply overhead. Within the larger context, a corrective phase likely remains incomplete following the development of the new all-time high, 82.78s and a lower high, 80.39s.
Looking ahead, the focus into next week’s auction will center upon market response to key supply, 79.80s-80.40s. Buy-side failure at this cluster would target key demand clusters below, 76s-75s/74.50s-73s, respectively. Alternatively, sell-side failure to drive price lower through this cluster would target key supply clusters overhead, 80s-81s/81.75s-82.75s, respectively. From a structural perspective, the highest probability path near-term is sell-side within the context of an incomplete corrective phase. Within this near-term context, the intermediate term (3-6 month) bias now shifts to neutral (barring development of new highs).
It is worth noting that sentiment based on the S&P Technology Sector Bullish Percent Index has seen bullish extreme sentiment bounce from lows made in June 2019. Stocks more broadly, as viewed via the NYSE, are now exhibiting decline in bullish sentiment. Asymmetric opportunity develops when the market exhibits extreme bullish or bearish sentiment with structural confirmation. Caution remains warranted on the buy-side as market structure and sentiment are divergent, implying a neutral bias.
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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