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Oversold & Testing Support: This is What a Short-Term Bounce Looks Like

by Tom Luong, March 9, 2022
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Political tension has been causing the market to drop rapidly. 

Everybody is wondering how low the markets will go. 

Right now, the S&P, the Nasdaq, and the Dow are all showing very similar patterns. 

The 3 major indices are moving in unison and I have good news.

Currently, all 3 of them are retesting support levels.

If the markets are able to stay above support, we may see stocks rally even higher.

But if it drops below support levels, we may see a lot of red incoming.

Macro Trend Breakdown

One Line Will Determine Which Way Prices Move

If you want to profit from a bullish bounce, there’s only one line you need to pay attention to.

That line is the support level. 

If the markets can maintain support, it’s a strong sign that stock prices will move back up.

Of course, we don’t know how far up they will go… but nonetheless we can position ourselves for a quick short-term gain.

Take a look at the S&P…

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Notice how it’s currently bouncing off the $4,100 level. 

This is the support line that I’m talking about.

If the S&P continues to bounce off this line, then we can expect to see movement to the upside follow.

But if the S&P drops below this line, then we may see a very significant pullback. 

However, all signs suggest that support will hold. 

The Nasdaq and the Dow look identical to the S&P right now.

Which leads me to say if support holds, the overall market will rally higher. 

Of course, I’m helping Stock Navigators position themselves for profits no matter which way the market moves - click here for more details.

Sector Highlight

Oversold Sectors vs. Overbought Sectors

Due to the war, many sectors are currently oversold.

The financial sector, the industrial sector, the communications sector, etc… they’re all dropping to support levels and oversold.

For example, here’s the chart of the Financial Select Sector SPDR Fund (XLF).

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Looks similar to the S&P chart, doesn’t it? 

If the financial sector can stay above support levels we’ll probably see a short-term bounce follow.

Meanwhile, the energy sector looks like the complete opposite of the XLF.

Here’s the Energy Select Sector SPDR Fund (XLE).

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The XLE is currently overbought and trading above resistance levels. 

Which means we’ll probably see a very aggressive move to the downside very soon. 

I’m analyzing every sector under the sun to show Stock Navigators which industries are strongest right now.

To stay updated with all my sector analysis, click here.

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