3 Places Where Defensive Plays Appear in Order Based on Their Charts

When is it time to play defensively in this market? I use the same technical tools that would get me in on the long side of the market to help me manage a trade and also look for any short positions I want to consider. Short positions for me are only done with options. Let's start with a chart on Peloton Interactive . This chart shows that there was support at the last low in this name, but if you follow basic technical analysis you can see that the larger pattern is a bearish pattern of lower lows and highs, unless we take out the April 13 high. Peloton now face a huge wall of resistance at the areas of $102.15-$106.60 and then $107.87-$110.89. Peloton Interactive (PTON) daily View Chart » View in New Window » Besides the price resistance Peloton currently is facing, we're looking at a confluence of Fibonacci timing cycles from May 24 to May 26. These cycles also suggest that we watch for a possible high. Because this is an area of natural resistance to the move, if you are long PTON you might want to do a few things here. First is that you would want to ratchet up stops on long positions. One of the ways that I would do that is with a 15- or 30-minute chart. I go down to a lower time frame chart because it is easier to see the prior swing lows and highs to adjust a stop. In this case I would use a prior swing low because I will be trailing a stop up. Bottom line, Fibonacci time and price suggest it is a good time to protect profits. How close you place a stop is up to the individual. Some are willing to give it a bit more room before giving up on a trade; some traders would be out already as we face resistance to the recent rally. I think of it this way: How much am I willing to give up in a pullback to try to stay in for a continued move up? Let's look at Peloton's 15-minute chart next. Peloton Interactive (PTON) 15-minute View Chart » View in New Window » On the 15-minute chart of PTON, I would be placing a stop below the prior swing low at the $98.57 level. I would want to risk less in this case due to the current failure to clear important resistance in price and time. I'm seeing the same thing in with the S&P 500 SPX. Let's look at that chart next. S&P 500 Index View Chart » View in New Window » In the SPX chart, there are some things that are positive, but we also need to acknowledge what is in the way of the SPX index trading higher. One of the positives is that key daily/weekly support has held so far at the 4055-4058 area. A couple negatives are that the 5/13 exponential moving average (EMA) combo is still in a sell mode at the moment with the 5-day below the 13-day EMA. This tells me the market is still more vulnerable to a failure on the downside and we need to be aware of that. The other thing that is a negative is that we have not been able to clear our next key resistance decision at the 4187 area. If you look at the SPX chart, you will see that the recent high was made around a symmetry projection of the last swing up. The first swing up was $126.25 and the second swing was very similar at $127.31. The failure to clear this key zone was followed with a tradable decline in Friday's session. As long as we stay under this recent high, I have to consider SPX vulnerable to more of a decline. However, I will be monitoring both time and price support on this pullback for the next possible entry on the buy side. Also if we can get the 5/13 EMA combo back in a buy position, that will support a possible clearing of resistance and higher prices instead. One other chart I wanted to share with you this week is my timing chart in the gold market. This is another name that is currently facing some resistance to the recent rally. Gold View Chart » View in New Window » This is another one that I would want to start ratchet-up stops on due to the timing cycles due either at the May 17-21 cycles and then the next grouping of cycles that is due May 24-27. Timing cycles won't always kick in, but they do often enough to suggest trailing up a stop. Remember, it's not only important where you enter a market. Use the same tools to help you exit and/or protect profits.

3 Places Where Defensive Plays Appear in Order Based on Their Charts

Caution should be exercised when dealing with Peloton Interactive, the S&P 500 and gold.

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