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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 following the recent development of a new all-time high, 82.78s. The primary expectation did play out as selling interest emerged in Monday’s auction driving price lower early week to 75.14s where buy excess halted the sell-side sequence. Price discovery higher developed into Thursday’s close to 79.41s where selling interest emerged, driving price modestly lower ahead of Friday’s close, settling 78.49s.
NinjaTrader
05-09 August 2019:
This week’s auction saw a gap lower open in Monday’s auction before price discovery lower developed, achieving the weekly stopping point low, 75.14s. Structural buy excess developed there, halting the sell-side sequence as narrow balance developed through Tuesday’s auction, 77.30s-76.12s.
A false breakdown out of balance developed in Wednesday’s open to 75.71s where a new buy excess developed. Price discovery higher developed to the balance high (77.30s) before a buy-side breakout ensued, driving price higher to 77.70s into Wednesday’s close. A gap higher open developed in Thursday’s trade before price discovery higher developed, achieving the weekly stopping point high, 79.41s, into Thursday’s close. Selling interest emerged early in Friday’s trade, driving price modestly lower to 77.89s ahead of Friday’s close, settling at 78.49s.
NinjaTrader
This week’s auction saw sell-side continuation early week to 75.14s where structural buy excess halted the sell-side sequence. A relief rally then ensued to 79.41s ahead of week’s end. Within the larger context, a corrective phase likely remains incomplete following the development of the new all-time high, 82.78s.
Looking ahead, the focus into next week’s auction will center upon market response to this week’s key demand, 76s-75.20s. Buy-side failure at this key demand would target key demand clusters below, 74.50s-73s/71.50s-70.25s, respectively. Alternatively, sell-side failure to drive price lower through this cluster would target key supply clusters above, 80s-81s/81.75s-82.60s, respectively. From a structural perspective, the highest probability path near-term is sell-side within the context of a stopping point high development at all-time highs and 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 decline to lows made in June 2019. Stocks more broadly, as viewed via the NYSE, are now exhibiting a similar 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 imply potential for lower prices.
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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