The profitable trading system in the stock market for the past two years has been to but the dip. The question is what level presents the best probabilities for a dip buying bounce?
We currently have three key support levels converging:
- The 50 day moving average at $200.22.
- The $200 price century mark is the gap up support level from late October.
- The 30 RSI is near those areas.
Any of those levels could be a potential bounce zone.
If those levels are lost intra-day then a bounce by end of day could bring the markets back over those levels by close.
My ideal trade would be a loss of the 50 day and $200 and drop to an RSI near 30 around $198 to allow me to enter with a great risk/reward ratio.
A momentum trade would be a loss of the 50 day then entering long with a close back over the 50 day.
Trade at your own risk, bounces can be tricky and markets tend to fall farther than we suspect it will. A good trade is one where you have a great risk/reward ratio with your stop loss versus your profit target.