The Importance Of The 50-Day Moving Average

Tuesday, we talked about a reversal chat pattern in the Nasdaq 100 (QQQ) that was created from the price clearing over the 50-day moving average.

Although today began with price under the 50-DMA, QQQs turned around, closing over Tuesdays high. Hence, the reversal pattern has confirmed right by a key moving average.

Now, the 50-DMA is a support area.

This is important to note when using major moving averages as references for support or resistance levels.

Looking forward, ideally, QQQs should hold the 50-DMA at 320, although we would have a stop under Tuesday’s low or under 311 to give it some room.

(Click on image to enlarge)

Additionally, the strength we are seeing in the QQQs also bodes well for tech giants several of whom also tested and held their 50-DMAs, such as Microsoft.

In a market with so many opportunities coming from new tech and SPACs, large tech has a lot to compete with for investors’ money.

With that said, this is a great time for large companies to push into new trends.

Several are trying to divest like Apple exploring the EV space.

Our takeaway from the QQQs support level and now rally is that buyers show up at these key moving averages. We do not want to see Nasdaq fail as that can drag everything with it. Nonetheless, QQQs may have held a key support level, but the leadership has clearly changed to energy, banks, and transportation.

S&P 500 (SPY394.17 high to clear.

Russell 2000 (IWM230 resistance. New support 215 area.

Dow (DIAAll time highs.

Nasdaq (QQQ) Needs to hold the 50-DMA at 319.57.

KRE (Regional Banks) All time highs.

SMH (Semiconductors) Next main support the 50-DMA at 231.62

IYT (Transportation) 249.49 the 10-DMA

IBB (Biotechnology) Watching to hold the 50-DMA at 160.53.

XRT (Retail) Needs to clear 81.46. Closed over 75.28 support.

Volatility Index (VXX) Needs to find support area.

Junk Bonds (JNK) Between 108.81 the 50-DMA and 109.34 the 10-DMA

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