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In this article, we examine the significant weekly order flow and market structure developments driving XLK price action.
The highest probability path for this week was for price discovery lower amidst the developing sell-side corrective phase and buy-side failure at key support, 76.22s, noted in the most recent XLK Weekly. The primary expectation did play out as sell-side continuation developed following the trapping of buyers in Tuesday’s auction near last week’s settlement. Price discovery lower developed to 71.95s ahead of Friday’s close, settling at 71.89s.
28- 31May 2019:
This week’s auction saw sell excess early in Tuesday’s auction, forming the weekly stopping point high, 74s. Selling interest emerged there, driving price lower to 73.05s where selling interest emerged into Tuesday’s close. Sell-side continuation developed in Wednesday’s trade, achieving a stopping point, 72.17s, where minor buy excess developed, halting the sell-side sequence.
Two-sided trade developed, 72.17s-72.87s, before buying interest emerged into Wednesday’s close. Price discovery higher developed in Thursday’s auction to 73.25s, near Tuesday’s sell-side breakdown area. Sell excess developed there, halting the buy-side retracement ahead of Thursday’s close. A gap lower open developed in Friday’s auction, driving price modestly lower, achieving the weekly stopping point low, 71.95s, ahead of Friday’s close, settling at 71.89s.
NinjaTrader
This week’s auction saw sell-side continuation to 71.95s following the recent failure of the buy-side to defend key support, 76.22s. Within the larger context, the structural buy-side breakout above 76.22s has failed and implies further price discovery lower amidst a corrective phase.
Looking ahead, the focus into next week’s auction will center upon market response to this week’s unsecured low, 71.95s. Buy-side failure at this support would target key demand clusters below, 72s-71.50s/70s-69.25s, respectively. Alternatively, sell-side failure to hold at this support would target key supply clusters above, 78s-78.30s/78.50s-78.90s, 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 initial breakout above and subsequent failure at 76.22s. Price discovery lower could continue toward 68.84s within the larger context of a neutral bias.
It is worth noting that sentiment based on the S&P Technology Sector Bullish Percent Index now reflects a substantial decline in bullish sentiment following the dramatic rise in bullish sentiment from January 2019 into April 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.
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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