Cycle Trading

Summary

• Stretch above 10 day MA led to consolidation
• Price holding below 7150 resistance
• 10 day MA catching up to price
• Breakout or backtest will guide next move

Stocks became stretched above the 10 day moving average last week on Friday, day 13, and have since begun to consolidate below the 7150 level. This consolidation is allowing the 10 day moving average time to catch up to price.

From a cycle perspective, this type of pause following a stretch condition is typical within an ongoing uptrend. The structure remains constructive, with price holding near recent highs rather than retracing sharply.

However, there are two potential paths emerging from this consolidation. Price may continue to compress below resistance, or it may rotate lower into a backtest of the prior 7000 breakout level.
While both scenarios remain possible, what is clear is that stocks remain in a daily uptrend, with the current consolidation working off the prior stretch.

If stocks break out above the 7150 level, then it would indicate a continuation of the daily uptrend and signal a cycle band buy condition. If instead stocks pull back toward 7000 and successfully backtest that level with a close back above the 10 day moving average, then that would also support continuation of the uptrend and signal a cycle band buy condition.

Cycle Alignment

Daily uptrend within broader bullish structure