Pay Attention to These Recent Lows

The major indices (NASDAQ, S&P 500, DJIA, and Russell 2000) have now managed to trade above the lows made in June for over a month. 

This has lead the way for tradable lows in sectors like biotech, semiconductors, and Bitcoin/Crypto and we have taken advantage of these rallies with profitable trades in SOXL and LABU over the last few weeks.

Now we are starting to see an improvement in breadth and potential lows, at least in the near term, in financials, transportation, and growth stocks like software.

These recent lows are important because they mark obvious price points to watch moving forward, as well as areas to manage risk.

Financials (XLF)

Financials have tested and held support at the 2018 and 2020 highs as well as the 200 week moving average.

It makes sense to be long financials above these levels, and if establishing a new position the recent low gives you a good place to manage your risk.

Transportation (IYT)

The same can be said for transportation stocks with buyers stepping up to defend support at the old highs from 2018 to 2020.

Is the current price action in transportation stocks pointing to an improving economy?

Software (IGV)

Software related stocks have been consolidating and trading in a tight range at the pre-covid high.

If we can continue to hold above the current low, there's a chance we could see a tradable counter trend rally that takes price back above the 200 week moving average and potentially higher if shorts start to cover.

Will the lows in these sectors hold? Are these longer-term bottoms?  

Let us know what you think.

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Nothing in this blog post should be considered investment advice and is provided for educational and entertainment purposes only. The commentary and information represent the opinion of the author and are not recommendations to buy or sell any security or investment product. The author may or may not hold positions in the securities and investments mentioned. Full disclaimer here.