Should small-cap U.S. equities be rallying because AI giant Nvidia just delivered another blowout earnings update? Sure, risk sentiment has improved, and continued AI investment comes with some immediate broader economic benefits, but the move still comes across as a little suspect, especially with the prospect of near-term Fed rate cuts dwindling by the day. While the price signals for our small-cap contract are pointing to upside risks, momentum indicators are not confirming, suggesting selling into strength may be the way to play it, especially if we see a reversal pattern.
Looking at the daily chart, we see a clear morning star bullish reversal pattern printed this week, with follow-through buying after the Nvidia results. However, as was the case in the prior session, the price has been unable to take out 2380 so far, marking the low struck on November 7. It’s only a minor level, but it has seen price action on either side of it this month, making it relevant when assessing setups.
Despite the bullish price signal, RSI (14) and MACD remain firmly bearish. RSI continues to trend lower beneath 50, indicating downside pressure remains even if it’s weakened a touch in recent days. MACD also sits in negative territory, having already crossed the signal line from above in late October. It too is showing signs of turning, but for now the combined message remains one where selling into strength may be the better way to play it.
Should the price be unable to breach and hold above 2380, shorts could be considered beneath the level with a stop above for protection, targeting 2327 support initially. Should that and Tuesday’s low give way, 2275 or 2242 screen as other downside targets.
Of course, if the price can push above and hold 2380, longs could also be considered, allowing for a stop to be placed beneath to protect against reversal. Such a move may see momentum indicators tilt neutral rather than bearish. If that were to occur, the merits of long trades would be improved. 2400, where the price was capped prior to the latest leg lower, looks as an appropriate initial target, with the 50DMA the next after that.
Good luck!
DS
Looking at the daily chart, we see a clear morning star bullish reversal pattern printed this week, with follow-through buying after the Nvidia results. However, as was the case in the prior session, the price has been unable to take out 2380 so far, marking the low struck on November 7. It’s only a minor level, but it has seen price action on either side of it this month, making it relevant when assessing setups.
Despite the bullish price signal, RSI (14) and MACD remain firmly bearish. RSI continues to trend lower beneath 50, indicating downside pressure remains even if it’s weakened a touch in recent days. MACD also sits in negative territory, having already crossed the signal line from above in late October. It too is showing signs of turning, but for now the combined message remains one where selling into strength may be the better way to play it.
Should the price be unable to breach and hold above 2380, shorts could be considered beneath the level with a stop above for protection, targeting 2327 support initially. Should that and Tuesday’s low give way, 2275 or 2242 screen as other downside targets.
Of course, if the price can push above and hold 2380, longs could also be considered, allowing for a stop to be placed beneath to protect against reversal. Such a move may see momentum indicators tilt neutral rather than bearish. If that were to occur, the merits of long trades would be improved. 2400, where the price was capped prior to the latest leg lower, looks as an appropriate initial target, with the 50DMA the next after that.
Good luck!
DS
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Exención de responsabilidad
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.