Pullback Prospect Lingers Despite Highs

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Simpler Trading Team

Nov 02nd 2021  .  2 min read

Pullback Prospect Lingers Despite Highs

2021-11-02

Another day of the market inching higher after struggling last week.

Has the seasonally weak period of September and October eased away?

This market can be tough to read – upward movement so far this week hasn’t sprinted higher by any means.

This market tends to rip and chop… with a pullback lingering in the minds of traders.

Even in the midst of an uncertain market, Simpler’s traders identify opportunities for short trades with proven tools and confirming recognizable patterns. As this market reveals more distribution, volatility brings more elastic levels of support.

Simpler’s traders watch for signals of a reversal by focusing on extended resistance levels.

If a pullback does occur, traders can use it as an opportunity to add overbought stocks to their trading positions. The watch is on for possible resistance in high-volume stocks to find entry points.

To identify potential entries, Simpler’s traders prioritize the market structure first. Traders can identify the lower extremes for support and recognize where the point of control is for stocks in a non-trending market (like this currently choppy period).

When traders find these levels, watch for the stock price to “ping-pong” off support.

As the S&P 500 and the Nasdaq appear to be on trajectories to more all-time highs, Simpler’s traders have been watchful for movement by the Federal Reserve Bank to officially start tapering. The response by the market could trigger movement in the form of selloffs.

As fewer and fewer stocks appear to propel the market forward, finding further price gains may be difficult in such an environment.

Simpler’s traders monitor any corner of the market that might present opportunities. The technology and communication sectors could provide setups in an upward move or traders could be looking at opportunities for short trades in energy and financials.

Which scenario is most likely?

When an index or stock has the potential for being overbought, technical signals and indicators provide traders with the information needed to look for solid trades. Uncertainty in the market makes it difficult to determine which of these is most likely to move lower.

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