Trading The Close Market Recap - 02/18/2026: Deceptive Relief Rally: SPX Near 6,800, Small Caps & Bitcoin at Risk
In today’s Trading The Close, Pro Trader Drew Dosek at Verified Investing broke down a market that is exhibiting deceptive behavior. While the indices staged a relief rally following tests of key support trend lines, the internal dynamics suggest a divergence from the robust recoveries seen in previous months. With critical PCE inflation data looming this Friday and mixed signals from FOMC minutes regarding future rate cuts, the market finds itself at a pivotal juncture.
The price action observed today, particularly the mid-day fade, suggests that while the bulls are attempting to regain control, the bears remain firmly entrenched in key technical zones. Below is a deep dive into the technical setups, historical precedents, and specific price levels analyzed in today’s show.
The S&P 500: A Weaker Breed of Recovery
The S&P 500 (SPX) closed the day up 0.56%, continuing its bounce from the trend line support identified in yesterday’s session. However, a closer inspection of the candle structure reveals underlying weakness that traders must not ignore.
The market is currently operating within the shadow of a large, red daily candle that recently drove prices down. Historically, how price acts within the range of such a dominant candle dictates the next major move. Drew pointed out a stark contrast between the current recovery and the one witnessed back in November.
In November, the market saw rapid green recovery candles that closed high, quickly negating the bearish signal. Today, however, the market struggled to break above the lower 50% of the recent large red candle.
"These three candles to the right of this red daily candle are not acting nearly as strong as what occurred back here in November. So that could be insights and foreshadowing for further trouble to get above the 50% area."
The intraday action confirmed this hesitation. After a morning of bullish consolidation, the rally failed at 1:20 PM Eastern, surrendering gains before a final 30-minute pop. This inability to reclaim higher ground suggests the market may eventually roll over to retest the critical trend line at 6,800. This level remains the "make or break" point for current market momentum.
Cracks in the Ice: Small Caps and Semiconductors
While the headline numbers show resilience, the underlying sectors are showing signs of stress—or as Drew termed it, "cracks in the ice."
IWM: Momentum Shift at All-Time Highs
The Russell 2000 ETF (IWM) presents a complex picture. While hovering near all-time highs, the technical structure is deteriorating. The ETF has broken a key parallel channel and trend line, signaling a shift in momentum.
"We're not yet fully cracked in the ice for it to have a huge plunge, but there's cracks in the ice emerging."
Traders should monitor the $260.62 level closely. A breach here could accelerate the momentum shift from a consolidation phase to a correction phase.
SMH: Trapped in the Range
Similarly, the Semiconductor ETF (SMH) had a positive session, pushing up from the 50% area of its parallel channel. However, like the broad market, it remains trapped within the range of a previous large red candle. Every subsequent daily close has failed to escape this bearish engulfing range, demonstrating the control sellers still exert on the sector. The key for tomorrow is whether SMH can breach this range or if it will succumb to gravity and retest the support levels that sparked this relief bounce.
Bitcoin: The Cycle Analysis and Downside Targets
Bitcoin is currently consolidating in the upper 50% of a large green recovery candle, suggesting near-term bullish probabilities. If this support holds, we could see a push toward the pivot low at $75,000. In a highly optimistic scenario, a surge could test the neckline of the head and shoulders pattern at $83,968.
However, the longer-term technicals paint a cautionary tale based on historical four-year cycles. Drew provided a compelling analysis of Bitcoin’s diminishing drawdown percentages over its major cycles:
- 2017 Cycle: Bitcoin declined 81% from its high.
- 2021 Cycle: Bitcoin declined 77% from its high.
- Current Cycle: If the pattern of "3% improvement" continues, a 74% correction would be the target.
"If Bitcoin has a 74% correction, getting 3% better each one of these corrections, then that would put Bitcoin down near $34,000."
This mathematical projection aligns with other bearish technical patterns, including a head and shoulders formation and simple moving average crossovers, which point to a target of $37,000.
For the bulls to negate this bearish thesis, Bitcoin must reclaim the neckline and break above the inclining trend line. Until then, while short-term bounces are tradeable, the macro structure suggests significant downside risk remains.
Energy Markets: The Bull Flag in Oil
In the commodities sector, US Oil is displaying textbook bullish technicals. The commodity rose 4.61% today, forming a consolidation pattern right on top of a declining trend line.
Typically, consolidation atop a trend line can be precarious, but in this instance, the price action originated from the bottom up, creating a "bull flag" formation. This structure is akin to "winding a coil in a spring," building potential energy for a breakout. The probabilities currently favor a move upward to the next resistance level, sitting just beneath $69 per barrel.
The AI and Memory Trade: Topping Tails and Breakdowns
The technology sector, specifically memory and AI hardware, has enjoyed a parabolic run over the last six months. However, the charts are now signaling exhaustion and potential reversal.
Western Digital (WDC)
After rallying from $78 in August to over $300, WDC is showing classic signs of a top. The stock registered a daily topping tail on February 12th, a bearish reversal signal that was respected by today’s price action. The break of its inclining trajectory suggests profit-taking is imminent.
Traders should watch for a breakdown of the inclining trend line at $284.45. Below that, support levels sit at the top of the parallel channel ($269.84), the 50% parallel mark ($242), and finally the bottom of the channel at $221.
S&DK and the Doji Candle
S&DK, spun off from WDC, displays a "massive doji candle" at the peak of its run near $600. A doji after a significant uptrend represents a fierce battle between buyers and sellers where neither side wins—often a precursor to a reversal.
The stock is currently being held down by a declining trend line and has tagged its inclining trend line support four times. As Drew noted, "We're not hitting the upside as many times as we're hitting the downside," implying that support is weakening. A break here targets $538.60 initially, with a deeper memory-play correction potentially dragging the stock down to $446.
NVIDIA: The Repetitive Breakdown Pattern
NVIDIA, the bellwether for AI, gained 1.63% today but remains technically compromised. The stock is exhibiting a recurring pattern where it breaks down from a parallel channel, attempts to retest it, and fails.
"Just memorize this pattern and you'll make a ton of money and not get whipped out of trades."
NVIDIA has been essentially range-bound since July of last year, and this stagnation is occurring as it breaks down from an uptrend that began in April. With earnings scheduled for next Wednesday, February 25th, the stock is at a critical juncture. Continued trading below the parallel channel increases the probability of a drop to minor support at $169.56, followed by major support at $153.13.
Earnings Volatility: Garmin and Carvana
Earnings season continues to provide extreme volatility, offering lessons in patience and level-to-level trading.
Garmin (GRMN): The Fade
Garmin experienced a massive pop on earnings, reaching as high as $256.80 before succumbing to profit-taking and closing at $237.40. This reversal occurred at the confluence of resistance from a consolidation zone and the 50% line of a parallel channel.
For traders looking to enter, chasing the gap up is rarely the strategy. Instead, patience reveals support levels lower down. The aggressive entry level sits at $230, while a more conservative level—aligning with recent pivots—is found at $221.74.
Carvana (CVNA): The Crash
In the post-market session, Carvana shares plummeted over 20%, trading down to $275 from a close of $361. The stock is currently testing the 61.8% Fibonacci retracement level. If this support fails, the next major downside target is the 78.6% retracement at $220.22.
However, for day traders, the volatility creates opportunity. A significant gap fill level exists at $259.17. If the stock opens above this level, an intraday dip into this zone could provide a technical bounce.
Netflix: A "Falling Knife" Opportunity?
Perhaps one of the most intriguing setups discussed was Netflix. The streaming giant has shed over 40% of its value since June, entering deep oversold territory.
The stock is rapidly approaching a convergence of major technical support:
- A long-term trend line dating back to the November 2021 high.
- The bottom of a parallel channel.
- The 200-week simple moving average.
This confluence occurs right around the $70.10 level.
"If selling pressure continues down into this trend line and the bottom of the parallel, and this 200 weekly average without a significant bounce, you can better believe there will be a technical bounce right here."
This setup suggests a high-probability mean reversion trade, with a potential bounce target back toward $86 or even $90.
Conclusion: Agility in a Changing Market
The key takeaway from today’s analysis is that while the market is staging a relief rally, the character of this move differs significantly from previous bullish phases. The "cracks in the ice" across small caps, the repetitive breakdown patterns in AI leaders like NVIDIA, and the historical cycle risks in Bitcoin all suggest that caution is warranted.
However, volatility breeds opportunity. Whether it is the bull flag in US Oil, the oversold bounce potential in Netflix at $70.10, or the intraday gap levels in Carvana, there are trades to be taken for those who remain disciplined.
As we approach Friday’s PCE data, the market is winding its coil. By focusing on specific price levels—6,800 on the SPX, 260.62 on IWM, and the various support zones identified in individual stocks—traders can navigate the noise and execute on high-probability setups. Stay agile, respect the charts, and let the price action dictate your next move.
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