Tracking Market Levels, Behavior With Caution


Simpler Trading Team

Jan 21st 2021  .  3 min read

This roller coaster market has been up and down and around again testing resistance and support.

Traders are edgy about whether the next twist around the bend will lead to a stall into a rally or a gut-wrenching downturn.

No one knows the future, but there are ways to track the continual testing of market levels and decide whether to raise your arms in elation or buckle up for a drop into chaos.

Major indexes are approaching key levels that could reveal market direction. Simpler’s traders are following the most important support and resistance levels through analysis and indicators.

We’re watching for targeted levels, but not with white-knuckle anticipation — we don’t want to overreact when the chart signals light up. To define a trend-changing move, we’re watching market behaviors:

  • A reverse after hitting a key level
  • A break beyond a key level and retest before continuing
  • Breaking a key level and running beyond that mark
  • Consolidating (almost coiling) around a key level

What is a key level?

This is a defined level of support or resistance that varies based on the asset or index.

We’re watching for signals that present a clear sign of significant change in market behavior. This sign doesn’t indicate the market has an “imminent” shift to the downside or that the bullish trend is running out of air. What it means is that we should pay attention to what’s happening.

The goal is not to “tell the future,” but to plan and prepare ways to read the market behavior if and when it reveals stronger direction or momentum.

This market has so far proven extended, “toppy” and choppy which begs for caution in how to play the movement without a clearer sign of change.

Simpler’s traders are taking heed of internal warnings of uncertainty by shortening chart time frames, cutting back trading size, and trailing up stops. This isn’t a position of giving up on the bullish trend, but caution.

Go here to learn more about how there is a little “magic” in the signals we follow.

We Saw: Despite records, a bland day — 

  • Big Tech still on the move
  • Tech push gives boost to Nasdaq
  • S&P inches back to positive, Dow down a few

We’re Watching: Repetition that leads to reward —

  • Continuation of bullish behavior
  • Our own mastery of the trading craft
  • Setups in: PTON, PINS, NFLX, TSLA, SPY