January 19, 2022
By Mish Schneider
Written by Mish
So far these last couple of weeks, we have written and talked about trading ranges, January calendar ranges, inflation, stagflation and precious metals.
And, we have also talked and written about the Transportation sector as the prime example of not only trading ranges, but also why we believe the market will hold tranding range suport levels.
Plus, we have talked IYT as the best hope for the economy both because of the eventual end of COVID and the infrastructure package.
There are 3 reasons to focus on Transportation.
Looking at the support level, IYT is sitting on the 200 daily moving average.
More importantly, IYT is holding the 50-week moving average, well outperforming some of the other members of the Economic Modern Family-Retail XRT Biotechnology IBB and Small Caps Index IWM.
Secondly, looking at the chart and our proprietary indicators, IYT looks ripe for a mean reversion. A mean reversion trade implies that a stock’s price has traded to and extreme low (or extreme high), and that the price has a strong probablitity of returning to its normal pattern.
On our proprietary software, we measure the mean reversion when momentum, using the dotted line on Real Motion indicator, crosses below the bollinger band, or the dashes. Then, we wait to see if the dotted line can cross back over the BB.
Furthermore, the price on the price chart above, which broke below the green bollinger band, now needs to close above it.
Hence the work is not done. IYT must move up in mometum and in price, clearing over 263. Then, the risk to Wednesday’s low is clear.
Transportation is a key barometer to watch and potentially trade to take advantage of theses support levels. Even in an inflationary time, with low supply and rising demand, that “hoarding” mentaility can continue to move goods along to a point of course.
Furthermore, we still see an endgame for Covid-that should surely give a boost to underperforming sectors in IYT-particularly airlines and cruise ships.
Of course, the advantage of trading ranges, is when they break, you have a low risk and quick exit, plus the understanding that patience is your friend until a new support level proves out.
Please click on the links to hear my segments today on Making Money With Charles Payne, BoomBust on RT TV and Ticker TV out of Australia.
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S&P 500 (SPY) 450 major support
Russell 2000 (IWM) 204-205 major support back over 216 better
Dow (DIA) 350 major support
Nasdaq (QQQ) 365 the 200-DMA support
KRE (Regional Banks) 73.00 a buy area to watch for
SMH (Semiconductors) 287.00 support then 269
IYT (Transportation) 260 the 50-WMA major point to hold
IBB (Biotechnology) 128 major support
XRT (Retail) 80 support to hold-back over 85 better
Junk Bonds (JNK) 106.50 key
SLV (Silver) Another gap up and now ready to test the 23 level
USO (US Oil Fund) 58 support
TLT (iShares 20+ Year Treasuries) Held the 200-WMA and rallied. 140 support
DBA (Agriculture) 20.31 best close in 6 years-close to taking that out
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