WallStreet: Bearish Momentum of Last 7 Trading Days Reaches Just above Support Line
The short term daily candle chart below shows the price of the WallStreet contract for difference (CFD) and trading just around 16,119 (around time of publication), after recovering from session lows of 16040 today.
This CFD index is trading lower over the last 7 trading sessions and has inched closer towards a long term bullish support line (point 6 in green on chart below) near 16,000 earlier today.
Last time WallStreet was covered in the Ideas You Can Trade series in mid-February, the support that was the focal point of the article had since provided the recovery that led to new highs near 16650 on April 4, 2014, and in that previous post a longer term perspective was also observed with the addition of weekly candle charts.
If the long term bullish support line that intersected today's lows provides a reversal of the bearish momentum, than a steep recovery could follow. However, if this line fails to hold again, then the pullback may look for support on an additional long term bullish line (point 3 dark green line on chart below) just below current levels, near 15870.
Below are examples of how to trade a bearish continuation or a bullish reversal:
1. BULLISH BUY ENTRY ORDER: Create a “Buy Entry Stop” @ 16219 with a Limit to take profit @ 16474 and a stop-loss @ 15999 Risk/Reward Summary: Limit risk = +255 points profit / (-220) Stop-loss risk = Gain to Loss ratio = 1.15
2. BEARISH SELL ENTRY ORDER: Create a “Sell Entry Stop” @ 15980 with a Limit to take profit @ 15859 and a stop-loss @ 16101 Risk/Reward Summary: Limit risk = +121 points profit / (-121) Stop-loss risk = Gain to Loss Ratio = 1.01
Short term chart (daily candles) :
A note on CFD’s: A Contract for Difference, or CFD, is a financial contract allowing traders to potentially profit whether markets move up or down and include risk of loss. CFDs are cash-settled based on the difference in the value of an underlying asset from the time a trade is opened to the time the position is closed. A list of available CFDs that can be traded with WorldWideMarkets.com (WWM) can be found on the WWM website.
In addition to CFDs, WWM - through a third-party - offers direct access to non-US residents to trade exchange trade equities on the US Stock Markets, with more information also available via the WWM homepage.