When it becomes difficult to find points of reference for a reversal in a trending market, I often turn to channels for guidance. Now that the 50% retracement on the S&P at 1121 has been breached, I'll be paying closer attention to the following channel on the /ES dating back to July. I've tweaked this channel slightly from when it was last posted to include more data and you can see that prices are now challenging the 75% line...
While the above chart shows more room for upside, the channels on the shorter time periods are bumping up against resistance. We'll use the SPY, QQQQ, and DIA to demonstrate...
SPY
QQQQ
DIA
While prices could certainly pop out of these channels to the upside and move higher, I'm betting on some weakness from this level and that's how the portfolio is currently positioned. However, if this market decides to rip higher from here, a handful of potential longs could be very useful. Here are a few more potential breakouts to add to the list...
AGCO - Inverse Head & Shoulders as Continuation Pattern
BIDU - Ascending Triangle
BWY - Cup & Handle (Thin)
SFY - Channel
Click Any Chart To Enlarge
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