The S&P and Nasdaq Composite broke to new all-time highs earlier this week. Buyers had their shot to build on those breakouts. Instead, both indices have fallen back below their prior high swing areas, giving sellers more control in the short term.
Those old highs are now risk-defining levels again. Stay below them, and the bias is more bearish. Recover above them and hold, and the failed-breakout pressure begins to ease.
The downside moves have also brought the 100-hour moving averages into play. That gives buyers a place to lean, but they need to hold support and build a recovery.
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S&P 500: The index has moved back below its former high swing area between 7,771 and 7,815. That area is now overhead resistance and risk for sellers. Staying below 7,771 keeps sellers in the stronger position. Moving back into the area would ease some pressure, while a sustained break above 7,815 would strengthen the recovery case.
On the downside, the 100-hour moving average at 7,719.30 is the immediate support test. Hold above it, and buyers have an opportunity to push back toward the old highs. Break below it with momentum, and the 200-hour moving average near 7,691 becomes the next target.
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Nasdaq Composite: The index has fallen back below its prior high swing area near 27,190–27,288.79. The upper boundary at 27,288.79 is now a close risk level for sellers. Staying below it keeps the failed breakout in play.
The decline has brought the 100-hour moving average near 27,115 into focus. Buyers need to defend that level to slow the decline and start a recovery. A sustained break below it would open the door toward the 200-hour moving average near 26,701.
The trading lesson
A breakout to a record high is bullish, but buyers need to keep the price above the breakout area. When the price falls back below, the technical message changes.
The old highs help sellers define and limit risk. The 100-hour moving averages give buyers a level to lean against. Hold those moving averages, and buyers get another shot. Break below them, and sellers have another reason to push lower.
This article was written by Greg Michalowski at investinglive.com.