Since mid 2009 derivatives exchange CME Group Inc (CME) has traded in an orderly sideways fashion, where any rallies and sell-offs over time always reverted to a mean.  This is in stark contrast to the stock’s wild times from 2004 to 2008, which saw a massive multi-year rally followed by a crash.

So far in 2013 the stock also enjoyed a healthy rally.  More specifically, in late February derivatives exchange CME Group Inc. (CME) broke out past a key resistance line that led to a 7% rally in a matter of three weeks.  By mid-March however as broader market internals started to weaken the stock topped and unlike the broader market did not follow-through to a new 2013 high earlier this month.  As such the stock was flashing negative divergence versus the broader market, not unusual near a medium-term market top given the financial sector’s early cyclical nature.

With yesterday’s sell-off CME Group Inc. (CME) came back to the very trend-line that it broke above in late February, thus putting the stock in an interesting spot.

On the closer-up daily chart below, the current juncture also involves a key support line that if broken looks to allow for the stock to drop toward its 200 day simple moving average, currently near $56.

Medium-term holders of the stock may here need to evaluate the risk/reward of holding the stock through a potential drop to the 200 day moving average while more active traders could consider a short-side play with defined risk.





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