Traders should realize that the Dow Industrials (INDU) are breaking below our short-term upward trend and this could sour investor psychology and even traders' psychology at this time!
Dow Industrials Chart - 60-minute interval.
Trend (A) was our short-term upward trend and looked like it would put up a fight and stay intact, but that trend has been broken to the downside. Traders will now be watching the 200- period MA (thin red) at 10,659 to see if it will provide the needed support a bullish trader needs at this time. With the 50- period MA (thin blue) and upward trend (A) being broken, traders should be defensive here! Defensive means you are snugging up stops on long trades and doing some selective shorting. Level (B) on the above chart now becomes our "confirmation" level for confirmation of a break in trend (A). If that level (10,580) were taken out to the downside, we could EMPHATICALLY say that this index is weaker than it was on January 03!
Defensive DOES NOT MEAN buying stocks near support thinking that they will hold up against a downward trend that doesn't seem to be stopping! This last point is aimed at IndexSkybox.com traders and our trading scenario we set up yesterday for shares of VeriSign (VRSN)! This WARNING is because we are headed into a weekend and there is only 30-minutes left in trading. We'll pick up a POTENTIAL bullish trade in shares of VRSN on IndexSkybox.com Monday morning, but don't want to expose our capital under current conditions.
S&P 500 Index Chart - 60-minute interval.
Just as it has before, the SPX.X has sliced right through our horizontal level we identified earlier today. This is another sign that bullish traders should be cautious about entering any bullish trades ahead of the weekend. Today, three levels of support in this index were broken (200-period MA, 50-period MA and horizontal level at 1,300). When three levels of support get broken, it's best to wait on bullish trades and see what happens at upward trending support (thick green).
Biotechnology Index Chart - 60-minute interval.
There are however some trades we'd be tempted to hold over the weekend. Those trades would be bearish in nature in the Biotechnology sector! Our second target has been achieved and traders can snug down their stops to that level. Isn't it amazing how this index tried to find support at Target #2? Understand your risk/reward as the trade develops and MOVE DOWN THOSE STOPS! We will now be eyeing Target #3 near 470.