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Revisiting an S&P 500 Chart Setup and Tracking 2 Stocks on Pullbacks

Microsoft and Abbott Laboratories are the names that are worth watching.
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Fibonacci timing cycles don't always reverse the market, but they do often enough that we need to watch them. If you read my article last week you know we had two time windows in the S&P 500 Index for a low and reversal back up. What happened was the low made in the first window (3/4 plus or minus a day) ended up putting in a major low.

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S&P 500 Index (SPX)

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We've already seen a rally of 167.95 so far. Now if we end up getting the full upside target off that low, we are looking at 4012 as the initial upside target off that low. As this market is now extending to the upside, it's generally a good idea to have relatively tight stops on any longs since this last low was made.

Next, let's take a look at Microsoft (MSFT) . This name also made a low on March 4, just slightly below a .618 retracement of a prior major swing.

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Microsoft (MSFT) daily

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Now if this low is more important, the potential upside targets come in at the $252.08 area and then $259.65.Because we are looking at this original setup after the fact, we now want to look at a secondary entry against the March 4 low. To identify support on a pullback, let's take a look at the 30-minute chart next.

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Microsoft (MSFT) 30-minute

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I've set up new support levels on the 30-minute chart of MSFT and so far we are holding above them. As long as we continue to hold above these areas illustrated on the chart, I'm good with the buy side and will define my maximum risk below the $227.13 swing low. An options strategy you can consider would be a 240-250 call spread or something similar with at least 30 to 45 days of time. I'm considering those strike prices due to the initial target for the setup on the daily chart. If we break $227.13, however, I would ditch the spread as I would consider the setup a bust.

Finally, let's check out Abbott Laboratories (ABT) . I like this setup because it includes both a 100% projection of a prior decline, which was very similar, along with a .618 retracement and a couple other price relationships that come in at the $114.19-70 area.

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Abbott Laboratories (ABT)

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If you're not already in Abbott, I would wait for another 15-minute chart trigger on the buy side before entering the trade. If we do see a new trigger and the setup starts to play out, the potential upside target comes in at the $132.29 area. If this same key support is violated, I will consider this setup a bust and will ditch my call spread.

(MSFT and ABT are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells these stocks? Learn more now.)

At the time of publication, Boroden was long an ABT call spread.