CME Chart – Facing a Hurdle

I charted the CME Group Inc (NASDAQ:CME) this morning just a few minutes after the markets opened while CME was trading at $325.75.  CME is still moving along its trading channel from the past few months, but might have a hard time gaining too much more from here.  On Monday CME came within 10 cents of its intraday high from a month earlier and failed.  That $330.00 level is going to be the key point to watch for the near term.  Another attempt and fail at $330 and CME will most likely fall back to its trend line of higher lows, if not lower.  If CME can break through this horizontal line of demarcation, it could jump quickly to its trend line of higher highs.  In the chart below I extended that line in red to show where it converges with CME’s six month high of $346.24.  Just like the $330 line, $346 will most likely act as a speed bump limiting CME’s chances to keep this rally going.

I mentioned the potential for CME to fail and fall below its trend line of higher lows.  That potential for CME to stall (or worse) increases based on how low CME’s 200 day moving average is compared to its current trading price.  At some point we should see a reversion to the mean and either CME will flatten out while its 200 day moving average catches up or it will falter and meet somewhere in the middle.  The chances of CME breaking out above the $346 line and its trend line of higher highs are slim, especially with the drag of its moving averages.  While CME could certainly be a good long term hold for some, I don’t think 2009 has a lot more to offer for it, although making it to $346 would be a 6% gain from CME’s current level.