Cycle Trading

Stocks formed a swing high on Friday then delivered bearish follow through by closing below both the 200 day MA and the 10 day MA on Monday. Stocks delivered more bearish follow through by breaking below the daily cycle trend line on Tuesday to confirm the daily cycle decline

Stocks should go on to turn the 10 day MA lower in order to complete its daily cycle decline. Instead, stocks drifted sideways on Wednesday and Thursday. Stocks are currently in a daily uptrend. If they form a swing low above the lower daily cycle band and then close above the 200 day MA that would also indicate that stocks will remain in their daily uptrend and signal a cycle band buy signal. We would then label day 37 as the DCL.

It is worth noting that the 10 day MA has only begun to turn lower, stocks have not even retraced to the 38 fib level, and there is a gap sitting at about the 50 day MA. There is a good chance that stocks will run into by resistance of the 10 day/200 day MA’s and break lower to fill the gap at the 50 day MA as it completes its DCL.