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After the close on Thursday our mid-term system triggered a buy signal. If you have not switched from short to long positions yet, we would encourage you to do so.
The low for QQQQ today was at a minor support level (which is positive), but strong support does not arrive until the 43 level. This does not mean that the ETF will fall to this level before the uptrend resumes, but this is certainly a possibility. With the 50 day moving average being broken today it is possible that today's low will prove to be the support that pushes QQQQ back above its 50 day within the next few days. As we still see the mid-term trend as up, this is a possibility. You could also look at the action from the last few days as a consolidation (shown on the chart with two small blue lines) before another leg down. This leg would likely end in the 43 area. We feel this is the worst case scenario. The best of course is today's low being the low of the recent pullback.
There is little to say new about the chart of SMH. The ETF is currently at strong support in the 33 area. This would also be the neckline of the possible head and shoulder formation. A break of 33 should push it to the lower support lines indicated on the chart. SMH has to break above the resistance below 36 for the head and shoulder formation to be invalidated.
IWM was able to stay above 77 with today's fall. With the ETF just below its 50 day moving average, it is in the best place to begin another move higher. A break of 77 will surely push IWM to 76. Even though major support is at 76, this would create a very clear head and shoulder formation and lead to a strong possibility of further weakness. Unlike with SMH, the head and shoulder formation is quite clear here. We will be looking for IWM to stay above 77 in the next few days. We feel a fall to the 76 area would only delay our gains from this buy signal, not lead this signal to end in the red.
Even though we give our subjective view in our commentaries, we advise all subscribers to follow our system and the current signal. Therefore, we would encourage you to initiate your long positions if you have not already done so.
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