Why SMH's 2% Rally Wasn't a Surprise
U.S. stocks closed mixed today following a re-escalation in geopolitical tensions. Main market indexes experienced a highly volatile session, initially tumbling before trimming some losses. The $Dow Jones(.DJI)$ fell-1.1%, probably an initial validation of the overheated signals studied for the previous week, the $S&P 500(.SPX)$ closed slightly negative -0.3%, and the $NASDAQ 100(NDX)$ closed +0.3% despite of the selloff in premarket this morning.
SMH Bounced +2%, How is it Possible?
Last night, I shared the $VanEck Semiconductor ETF(SMH)$ chart with subscribers, highlighting a bullish reversal candle at the lower band, an oversold Stochastic indicator, and the open gap above. As I noted, this “COULD trigger a bounce tomorrow”, which is what we saw today.
Was it a smooth bounce? Not at all. The morning selloff was strong, which is precisely why I provided modeled daily levels (bullish above / bearish below) for today. This included not only the standard SPX levels for paid subscribers in our daily edition, but also for $Invesco QQQ(QQQ)$ $NVIDIA(NVDA)$ $Advanced Micro Devices(AMD)$ $Micron Technology(MU)$ $Qualcomm(QCOM)$ $Taiwan Semiconductor Manufacturing(TSM)$ $Applied Materials(AMAT)$ SMH, allowing subscribers to validate every move using the central daily level (CDL) and the targets around it.
For example:
The Central Daily Level (CDL) for SMH was 578, with the price turning bullish above it and bearish below.
At the open (9:32AM), the price recovered this level, triggering a bullish alert for long positions (and invalidating short positions). Furthermore, the index bounced to 589 and consolidated at 10:00 AM before reversing to revisit 578. It respected that level perfectly, subsequently rallying toward 589 and 597.
These were all provided as modeled levels last night, where institutional algorithms often react, as we saw today.
Potential Bullish Setup + Central Level Recovered = Confirmation
Last night, I also highlighted NVDA’s bounce from its 200DMA and the importance of 195.5 as today’s CDL. Once the initial resistance at 199 was breached, the price moved to 202, the next modeled level, and closed the day in the green.
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