Key Supports Hold
RLT Newsletter
After a week of bearish price action, Monday finally gave us a solid bullish gap at the open, and more importantly, it came with follow through throughout the session.
The broad market isn’t out of the woods yet. Both QQQ and SPY remain inside their current consolidation ranges and are still trading below last Tuesday’s gap. Filling that gap is the first short-term target for the bulls. If the market can push above that gap, the odds of a larger correction begin to diminish considerably.
The key levels to watch are now $703 on QQQ and $729 on SPY. As long as those levels hold, I remain bullish on the market in the short term.
SPY Daily Chart
Nvidia Bull Support Held
We saw some excellent technical levels get hit during Monday’s shake out. NVDA finally filled its lower gap and tagged the 200-day SMA. The risk-to-reward setup is pretty solid here. The next hurdle for the bulls is the 100-day SMA, which sits just above Monday’s candle.
For those who are not already long NVDA, this looks like a strong bracket trade candidate. If price breaks above Monday’s high, it is bullish. If it breaks below Monday’s low, it is bearish.
The stock has formed about as picture-perfect of a head and shoulders pattern as you’ll ever see. However, when large bearish patterns fail to confirm, they often create powerful bear traps as traders rush to cover short positions. If NVDA can reclaim and close above the 100-day SMA, I think a move toward $205 makes a lot of sense.
NVDA Daily Chart
QCOM Repeating History?
QCOM has a very similar head and shoulders setup to NVDA. After five consecutive bearish sessions, it also looks like it could be setting up for a bear trap. A move above Monday’s high, especially if it comes on a gap higher, would be an early signal that buyers are taking back control and that the stock could push nicely higher.
If we look back to the last time QCOM experienced the kind of massive bullish volume we saw in May, we have to go all the way back to 2019. At that time, the stock was also breaking out of a massive multi-year consolidation. It endured a sharp retest the following month, much like we’re seeing now, before finding support and grinding higher to new all-time highs.
If that same playbook unfolds again, the $184 level should become key support and the 100-week SMA should not be tested before QCOM resumes its move higher. Even if the stock only manages a lower high instead of a new all-time high, there is still enough upside here to make for an attractive swing trade.
QCOM Monthly Chart
Broadcom Buy Zone
AVGO is also looking similar to the other two semi names above. Monday produced a hammer candle directly off both the 100-day and 200-day SMAs. The $360 level represents major former resistance that should now act as support. If that level fails, I would expect a move toward $333. However, as long as AVGO continues to hold the 200-day SMA, a rally back toward $400 and potentially the open gap near $420 remains a very realistic target.
AVGO Daily Chart
SOFI Follow Up
SOFI, which I highlighted last week, is also trying to do something interesting. It printed a hammer candle right at the confluence of its 100-week SMA and 100-day SMA. The initial upside target remains the $20 area, offering roughly 11% upside from current levels.
Overall, Monday produced a long list of bullish reversal candles, not only in the major indices but also in names I have discussed recently like CIEN, SITM, AAOI, GOOGL, MRVL, and several others.
As long as the bulls can defend Monday’s lows and continue building on these reversal candles, I think this rally has room to continue. However, if those candles begin to fail, especially over the next couple of sessions, I would expect volatility to increase as we move into July. What’s great is we now have a great level to trade gains on so many charts. Check out Monday’s Swing Room below for even more detailed analysis on these stocks and many more!