Cycle Trading

Summary

• 7-month consolidation tested
• Move above 7000
• Stretch above 10 day MA
• Eventual backtest likely

Stocks had been consolidating below the 7000 level for the past seven months — until Wednesday. Price moved above 7000 on Wednesday and followed through higher on Thursday, shifting price out of the prior range.

Stocks are now trading above a key level, but are stretched above the 10 day moving average. From a cycle perspective, this stretch suggests that an eventual backtest of the 7000 level is likely to allow the 10 day MA time to catch up to price before a more sustained move can develop. If stocks pull back and hold above 7000, then the structure would remain intact and support further upside. However, a failure to hold this level would raise the risk of a move back into the prior range.

Cycle Alignment

Daily: Uptrend — above 7000, backtest likely