It's A Fine Line Between Bullish & Bearish on S&P500 | Apple, Netflix

As we highlighted in last week’s video, two bearish monthly candles warn of a potential top, although whilst prices hold key support bulls are well within their rights to have another crack at the highs. And they may take comfort in the fact that the S&P500 has closed higher 63.3% of the time in October over the past 30 years, and this bullish bias increases to 73.3% and 76.7% for November and December.  


We can see on the S&P500 daily chart that the gap has nearly closed and (so far) provided support. A potential corrective channel is forming, so bulls could take a break of the descending trendline as a signal prices are headed back towards their highs. Yet given the choppy nature of price action we’re also on guard for a break beneath the support zone. So we’ll continue to monitor S&P500 stocks for both long and short setups.

  • For bullish setups on the index, we’d prefer to see the support zone hold and / or prices break above the retracement line. The all-time highs are the initial target, before keeping an open target if it break highs.
  • A clear break beneath the support zone suggests we’re in for a deeper correction / part of a larger top. However, a minor close beneath support may not cut it, given the choppy nature of price action.  


Apple has broken out of compression with a firm close above its retracement line. Two bullish channels remain in play and the stock is now accelerating away from the lower trendline of the internal channel. The 20-day eMA also provided support ahead of yesterday’s breakout.

  • The near-term bias remains bullish above 216.78 support, or a break beneath yesterday’s low could also be used for a more aggrieve approach to risk management. There is also the lower channel to consider, but it becomes a question of reward to risk.
  • Bulls can use the highs around 233 as a target but, given the overall trend structure, an open upside target could also be considered.




Netflix appears to be setting itself up for a dead cat bounce
. Since the prior analysis, bears pushed the stock to a fresh YTD low which dragged RSI to oversold, yet price action remains firmly bearish. Yes, a slight bullish divergence with RSI has formed but a momentum low doesn’t always mark a price low. Besides, now prices are consolidating it allows time for RSI to recalibrate. And whilst resistance levels hold, bears aren’t likely to flee.

  • The daily trend remains bearish below 300, although the zone around the broken trendline and 275.79 – 282.66 makes a tempting area for bears to fade into.
  • For fading (shorting into a rising market, in this case) we’d want volatility to remain low. Keep in mind that without news to knock this lower, patterns such as dead cat bounces can go on for some time as they slowly grind higher. So, an earlier entry may require a wider stop.
  • Alternatively, bears could wait for bearish momentum to return before assuming the dead cat bounce has completed, then use the 230 low as an initial target. 


Related analysis:
Monitoring Apple For A Breakout From Compression
S&P500 Wobbles At The Highs On Trump’s Impeachment Inquiry
Whilst FedEx Sounds The Alarm For Global Trade, Can UBS Weather The Storm? | FDX, UPS
Bears Regain Control Over Netflix



Related Articles

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.