Video and Report Headlines
- 4wk High-Low Percent Remains Bullish
- SPY and QQQ Maintain Steep Uptrends
- MDY Surges to Maintain Uptrend
- URA Breaks Out and Retests Support
- GPN Bounces After Throwback
- ADSK Forms Flag Big Move
- DDOG Returns to Breakout Zone
- SWK Holds By a Thread
- Trading the Swing within the Pattern (VRTX)
The next Chart Trader will be posted on Tuesday morning, March 26th.
4wk High-Low Percent Remains Bullish
The 4-wk High-Low Percent indicators for the S&P 500 and Nasdaq 100 turned bullish in early November (green arrow) and remain bullish (see explanation below the chart). SPX 4wk High-Low Percent surged to 26.84% as the percentage of stocks making 4-wk highs expanded. NDX 4wk High-Low Percent hit 15.84%, which is strong enough, but not as strong as SPX.
About the Indicators: 4-wk High-Low Percent is the percentage of 4-week highs less the percentage of 4-wk lows within an index. These indicators turn bullish with a move above +20% (green bars) and bearish with a move below -20% (red bars). I am only focused on the S&P 500 and Nasdaq 100 for signals. The green shading on the chart above shows the active bullish signals for the S&P 500 and Nasdaq 100. The red shading shows the active bearish signals. The green arrows on the price chart show when 4-week High-Low Percent is bullish for both the S&P 500 and Nasdaq 100. This means BOTH must be bullish to signal a short-term uptrend in SPY. A downtrend signal triggers when BOTH are bearish.
SPY and QQQ Maintain Steep Uptrends
SPY continues to stair-step higher with short pullbacks followed by new highs. The ETF notched another new high on Wednesday and is now up 26.74% since late October (98 days). The red lines show the ATR Trailing Stop (3 x ATR(22). This ATR Trailing Stop started in early November and held throughout the short-term uptrend, which means pullbacks in 2024 were less than 3 ATR(22) values. A break below this line (506.16) would signal a decline greater than 3 ATR(22) values. Such a move would be an outsized decline that could signal the start of a corrective period. Notice that SPY experienced an outsized decline on August 9th (3 ATR drop) and this signaled the start of a correction.
QQQ also surged on Wednesday, but did not notch a new high. QQQ peaked two weeks ago. Even so, QQQ is still in an uptrend and not far from its high. It crossed above 440 on March 1st and has since consolidated in this area. I am also using the ATR Trailing Stop (3 x ATR(22)) to define the short-term uptrend in QQQ (429.59). QQQ broke this line in early January and then surged to a new high. As with the 4-wk High-Low Percent indicators, I would like to see both SPY and QQQ trigger their ATR Trailing Stops before calling for a market correction.
MDY Surges to Maintain Uptrend
Small-caps (IJR) and mid-caps (MDY) also surged over the last two days. I am focused on mid-caps because they are stronger than small-caps, though not as strong as large-caps (SPY). The chart below shows MDY breaking out of a flag pattern on February 8th and following through into March. MDY edged lower last week with a pennant or small falling wedge and broke out with a surge on Wednesday. The pennant lows and ATR Trailing Stop mark the first level to watch going forward. A close below 530 would reverse the short-term uptrend and call for a corrective period.
Chart Analysis, Setups and Trading Ideas
URA Breaks Out and Retests Support
The Uranium ETF (URA) was featured at the end of February as it became oversold within a bigger uptrend. The ETF subsequently broke short-term resistance with a surge on March 7th and then fell back with a sharp 5-day decline. Despite this sharp decline, URA ultimately held support in the 27 area last week. The ETF rebounded with a 3.3% pop on Wednesday and the breakout remains in play (bullish). I am marking re-evaluation support at 27.
GPN Bounces After Throwback
Global Payments (GPN) is part of the Mobile Payments ETF (IPAY) and FinTech ETF (FINX), both of which are leading the market. GPN surged some 39% and then retraced around 33% with a decline back to the 130 area. The blue shading marks a Support-Reversal Zone. Broken resistance from the August-September highs turns into support and there is also support from the December lows. GPN surged early last week and broke short-term resistance. It fell back on Thursday-Friday and I view this as a throwback after the breakout. A throwback is typically a 1-5 day pullback after a big move. Throwbacks provide traders with a second opportunity to partake in the breakout. GPN turned up again the last three days and remains bullish. The red line shows the ATR Trailing Stop (2 x ATR(22) for reference.
ADSK Forms Flag Big Move
AutoDesk (ADSK) led the software group higher from late October to mid February with a 40% advance. The stock then corrected with a falling flag/channel over the last six weeks. This is a correction/consolidation after a sharp advance. As such, I consider it a bullish continuation pattern. Note that I am electing to ignore the spike above 275 because it triggered after earnings and lasted less than 30 minutes (the open). ADSK surged the last two days and is on the verge of a breakout that would signal a continuation higher. A close below 250 would warrant a re-evaluation.
DDOG Returns to Breakout Zone
DataDog (DDOG) is a high-beta stock with above average risk. This SaaS company provides software and services to monitor cloud infrastructure and processes. The stock exploded in early November with a huge gap and continued higher into February. DDOG broke resistance in the 118 area and fell back to this breakout zone in mid March. I view this as a pullback within a bigger uptrend. DDOG firmed in the 120 area the last two weeks and a breakout at 125 would be short-term bullish. This would signal a continuation of the bigger uptrend and I would then mark re-evaluation support at 120.
SWK Holds By a Thread
The next chart shows Stanley Black & Decker (SWK) with a breakout, a hard pullback and a surge back above the breakout zone. Note that SWK was first featured on March 12th. It is tough to sit through such a sharp pullback and this is why traders need to plan their trades. Establish your rationale for the trade and set the levels for an exit. Decide first if you are trading based on closing prices, and if you intend to monitor price action during trading hours. Personally, I prefer to NOT watch the market during trading hours and use closing prices for signals. I set the re-evaluation level at 88 on March 12th and SWK closed just above this level on Friday and Monday (88.15 and 88.13). I got a bit lucky on this one as the stop did not trigger and SWK surged back above 92. The breakout is back in play and I would raise my re-evaluation level to 90.
Trading the Swing within the Pattern (VRTX)
The next chart shows Vertex (VRTX) with an example of trading the short-term swing within a bigger bullish continuation pattern. First, the long-term trend is up as VRTX hit a new high in February. Second, the stock corrected with a falling wedge that retraced just over 33% of the advance. There is also support in the 400-410 area from the late December dip (blue oval). The falling wedge is a correction after the big advance, and thus a bullish continuation pattern. A breakout in the 435 area would reverse this two month downtrend. Traders looking to get a jump on the breakout can time the swing within the pattern. VRTX fell in March and the swing is down. The stock stalled the last two weeks and established short-term resistance at 416. A breakout here would reverse this downswing and increase the odds of a bigger breakout.
