Monday was a great example of how support / resistance levels are set and used. Yesterday, I set support @ 44.0. This level is where there is ‘congestion’ in the market. This is both on the down and upside. So when the market goes thru a support level , that level then becomes a resistance level.

So Monday, after the housing market report, the market blew thru support. Once it blew thru the support, the 44.0 level then became resistance on the upside. From the chart below, you can see the market did hesitate at the 44.0 level until the afternoon.

From 12:30 to 2 p.m. , the market re-tested the 44.0 level. Finally at 2 p.m. the market pushed thru closing higher.

Tuesday QQQQ : Support 43.85 | Resistance 44.45 / 44.7

~squid

Another day, another week. Options are expiring this week. I am going to hold off on my analysis until later in the week, when I get a better idea of the levels I plan to trade.

The QQQQ’s ended up with a narrow range on Friday. A failed move on Friday, puts resistance at around the 44.25 level. It is going to be really tight, and unless we have a bear day, the QQQQ’s will break thru that level. The next resistance level will be around 44.5.

The first time thru a level, the QQQQ’s will fade, so I am going to make sure it is a good move before going long.

Monday QQQQ : Support 44.0 | Resistance 44.5 to 44.3

UPDATE : 9:55 AM NYC Time [ We have the new home sales report due at 10:AM that could move the market]

Another good day on the street. The QQQQ’s took out my resistance at 43.45. It did mill around at 43.40 for a while. After running up, it ran into more pressure. And ont the way down again started to run into conjestion at 43.45. Once you go past a resistance level, it becomes a support level.

Wednesday QQQQ : Support 43.3 & 43.0 | Resistance 43.75 to 44.0

The resistance is a range today. I see strong resistance in that range, not just one number. I am moving support to where yesterday’s congestion cleared.

~squid

The market shows some strength on Monday. The cubes had started out above my resistance of 43, so 43 became the level I looked for support. The market did find support there, and rallied higher , closing at 43.27.

I think we will still see support around the 43 level, and my resistance level has moved up to 43.45 A pretty narrow spread, so look for a breakout on Tuesday. If support is broken at 43 on the downside, we should see more support around 42.75.

In the short term, the QQQQ’s are looking overbought. I still list 44 as a significant level on the upside.

I sold my options near the open. It may have looked like if I had hung on I would have made more. I do think “The first loss is the best loss” and I did the right thing by closing out. I did close out with a profit on the trades.

Tuesday QQQQ : Support 43.0 & 42.75 | Resistance 43.45
Short Term Resistance 44.0

Chart courtesy of StockCharts
~squid

The MAR 42 Puts I sold at the open. The QQQQ’s gapped up. I held off closing my positions until it looked like it was going to refill the gap. , then I closed the MAR 43 calls. They were leftover from a multi leg trade. I really screwed the pooch on that trade, but it still came out profitable.

Funny thing is, the spreads were less than sucky for the 43 calls. They were still sucky, but better than normal. On an open like this, the spreads tend to be pretty wide.

Right now, I am flat in my account. I have some things coming up , and I won’t be back trading until next week.

UPDATE : I did scale out gettign out of the trade. I sold some of the position first, then held on to the other part for a little bit to see if it was going to mive back up.