Despite brutal Empire State Manufacturing numbers on Monday, indexes rallied. All it took were a few optimistic words about the debt ceiling. Granted, nothing surrounding the debt ceiling was resolved, but that matters not. Nor did it matter when House Speaker Kevin McCarthy said the two sides were still far apart.
Eventually, the matter will get resolved. It will hit the market in the short term due to continued debt fears or even a few days of default, but I believe it will create some terrific trading opportunities and long-term buying opportunities.
Tech continues to lead the way, although the iShares Russell 2000 ETF (IWM) showed a bit of life on Monday. The ETF closed above its 21-day exponential moving average (EMA) for the first time since April 24. There is still a lot of congestion between $175 and $180, but a close above $176 should start getting the attention of breakout and momentum traders.
Normally, I don't like to get too involved with a stock in the crosshairs of regulation, but Coinbase Global (COIN) has my attention. Its shares have been trading in a wide intraday range over the past couple sessions, but we have a pennant pattern here with multiple EMAs contained within the pattern.
This often means we are set up for a volatile move.
The stock managed to close above the 10-day EMA, 21-day EMA and 50-day EMA on Monday. It also touched both the support and resistance level of the current wedge. Either breakout or breakdown could be powerful here. Each has about a $3 move before it hits the high or low point of the wedge. A breakdown under $57 should find initial support at $54, but a test of $50 becomes a high probability.
Conversely, a break above $61 puts a quick move to $64 in play. The upside here, though, appears to be more potent than the downside move. There is little resistance after $64 until the stock trades back to $73. With a 20%-plus short interest, I wouldn't underestimate the potential of a 7-handle print on a breakout.
