Back on May 14, with SPDR Retail ETF (XRT) trading at 89.56, we discussed the following technical (and macro) setup, recalls Mike Paulenoff of MPTrader.
"My conclusion technically is that all of the action from the Jan. 28 high at 99.24 through Tuesday's (May 12) higher pullback low, represents a larger, bullish digestion period and pattern atop the dominant 15-month uptrend. In addition, based on my experience, the coil-type pattern that has been carved out has the requisite number of traverses across the contracting range to be considered complete or nearly complete, which if reasonably accurate, argues for the emergence of a new upleg in the XRT that propels the Retail ETF to new highs above 100, with an outlier upside target zone of 108 to 112."
Fast-forward to today (6/02), we see XRT trading at the 94.50 range, but more importantly, the price action continues to put upward pressure on the upper boundary line of the January-June bullish coil formation, suggesting strongly (to me) that XRT is on the verge of an upside breakout from the multi-month bullish digestion period and pattern, as well as a potentially powerful vertical thrust that propels price to a new ATH above the 1/28/21 high at 99.24, towards a projected target zone above 105, perhaps closer to 110 prior to completion.
As long as any forthcoming weakness in XRT is contained above 91.50, my work argues that XRT is within hours of a potent upside breakout.
Mike Paulenoff is co-founder of MPTrader.com, a live trading room featuring his analysis on the key key market indices and bellwether stocks & ETFs.