Looking at Monday’s red candle probably made your stomach drop a little.
You’re staring at some momentum names that have ripped 20%, 50%, even 100% since early April, and that voice in your head is whispering: “Did I just buy the top? Is this whole thing about to collapse?”
I get it. That hesitation is completely natural when things go parabolic.
But before you panic-sell your winners or start hunting for short entries, let me show you what the price action is actually doing under the hood. Because honestly? What happened Monday wasn’t scary at all.
It was textbook.
The MA10 Is Quietly Running the Show
Here’s something beautiful that most people are missing right now.
The 10-day moving average has been trending up, rising cleanly, and every single time price touches it, buyers step in. No hesitation. No drawn-out breakdown. Just a touch and a bounce — over and over again.
That’s not coincidence. That’s a dynamic support level that’s actively working.
We’ve seen it happen three distinct times now. Touch the MA10, bounce off the MA10. The pattern is so clean it’s almost boring. But boring patterns that work consistently? That’s where money gets made.
Right now the MA10 sits around 7,140, and it’s still rising. Until that changes, the path of least resistance stays up.
Simple as that.
Monday’s Selloff? That Was the Plan All Along
I know this sounds backwards, but hear me out.
What we saw Monday was a deliberate test of the breakout bar — the exact candle that launched this latest leg higher. Price pulled back, touched that axis line near 7,190, got close to the MA10, and then... left behind a demand tail.
That demand tail tells you everything. Buyers didn’t just sit there watching price drop. They stepped in aggressively and defended the level.
Actually, we called this exact move in Monday’s email. Flag pattern breakout → backtest → continuation. That’s the sequence every swing trader knows by heart. And we just completed step two.
A weak market doesn’t bounce off support like that. A weak market slices through key levels and keeps falling. This one touched support and immediately found buyers.
So what looked terrifying on Monday? It was actually the market doing exactly what healthy trends do.
“But Everything Feels So Overbought!”
Yeah, no kidding. Price has been riding above the MA10 with serious momentum. Some stocks have gained 40-50% in a single month. You could slap an “overbought” label on this whole move and not be wrong.
But here’s what I’ve learned about overbought conditions in strong trends:
They mean absolutely nothing until aggressive supply actually shows up.
And right now? Supply is quiet. Volume on recent pullbacks has been light. Volatility bars are small and contained. None of the warning signs that typically precede real breakdowns are flashing.
Truth be told, what gets overbought in a strong trend tends to stay overbought way longer than most people stay patient. The market doesn’t care about your RSI reading when buyers are still in control.
Strong markets have a habit of staying “too high” until something fundamental shifts. We’re not there yet.
Two Numbers That Matter More Than Everything Else
Let me cut through all the noise and give you the only levels that actually matter right now:
7,190 — the axis line, your first line of defense
7,130 — the breakout bar zone, your second line of defense
As long as this 7,130-7,190 zone holds, the S&P 500 has every right to push higher and challenge new territory. The upswing stays intact. Direction stays up.
The index could even dip back into that zone, chop around for a few days, and bounce without doing any real structural damage. That’s just how healthy trends breathe.
Now, if both levels break? Then we’re looking at 6,950-7,000 as the next meaningful support zone. Even that wouldn’t kill the long-term trend — it would just be a deeper pullback within a still-healthy structure.
But we’re not there yet. And honestly? The way buyers defended Monday’s test makes me think we won’t get there anytime soon.
The Rotation Risk Nobody’s Talking About
Here’s where I need to be direct with you.
While the overall market direction is up, rotation is moving at breakneck speed right now. Some of these momentum darlings that ripped 20%, 50%, 100% in a matter of weeks are now sitting in seriously dangerous territory.
Chasing those names at current levels? That’s how good traders get hurt. Not because the stocks are bad, but because the risk-reward is terrible when you’re buying after a 100% run.
If you missed the initial move and you’re not comfortable trading on 15-minute or hourly charts to find tighter entries, don’t force it. There are plenty of other setups forming that aren’t carrying that kind of extension risk.
Actually, let me be even more specific: if you’re thinking about buying LITE, COHR, or any of the optical names that have gone parabolic, you better have a plan for violent pullbacks. Because they’re coming. When? Nobody knows. But 40% moves in a month don’t just keep going forever.
Your job is to find the next wave, not chase the last one.
Refer to these 3 Grade A setups with theme label and rationale behind (fresh from the live session yesterday before market open) below!
Zoom Out: This Is Still a Reaccumulation Story
Pull back to the big picture for a second, because this is important.
Since last April, the S&P has been building something. A strong run up, followed by a reaccumulation structure — complete with a spring (that scary shakeout below support that terrified everyone), followed by a massive sign of strength rally.
That sign of strength rally? It’s still unfolding right now. We’re living inside it.
What comes after this phase? Eventually, a major backing-up process — a real, meaningful pullback that sets up the next leg higher. But we haven’t seen that yet. And until we do, the immediate swing stays up.
I don’t see a single technical red flag suggesting the upswing is reversing. The structure is clean. The levels are holding. Buyers are defending support.
What I’m Watching This Week
The setup is pretty straightforward:
If 7,130-7,190 holds: Expect continuation higher. The backtest is complete, buyers proved they’re still in control, and the path clears toward new highs.
If 7,130-7,190 breaks: Don’t panic, but do pay attention. Next meaningful support sits at 6,950-7,000. Even a drop there keeps the bigger bullish structure intact.
On momentum stocks: Use smaller timeframes for entries if you absolutely must get involved. Otherwise, wait for the rotation to surface fresh setups with better risk-reward profiles.
The trend is up. The structure is healthy. Monday’s pullback was a gift for anyone who missed the initial move.
Stay patient. Manage your risk. And let the market come to you.
Until 7,130 breaks, I’m not fighting this trend. Neither should you.
Refer to the 4 setups I sent out on Monday and 2 of them are still in a sweet spot.
Watch the in-depth analysis below:
Video Length: 00:08:52
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