The stock market's limit

The stock market is working through a range triggered by a huge one week decline in early February. The recovery has given bullish investors hope as a number of stocks continue to advance from bases and hit new highs. But the moment of truth is coming! The market is facing a test.

You can see from the chart below there is a line of resistance in the broader market represented by the Nasdaq. Until the market actually clears this price point (i.e. the line) it is range bound. There's nothing wrong with that but eventually there can be a shift in sentiment leading to more selling. If that happens it can trigger a breakdown in the otherwise bullish set up.

Use the market's channel as a predictor, matching buys and sells to what is the most likely next move by the market.

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