Video and Report Headlines
- 4-wk High-Low Percent Remains Bullish
- SPY and Hold 50-day SMA During Advance
- MDY, the 50-day and the Trailing Stop
- URA Tests January Low
- ZTS Breaks Out and Leads
- CGSP Surges off Support-Reversal Zone
- CAH Breaks Out to New High
The next Chart Trader will be posted on Tuesday morning, March 5th.
4-week High-Low Percent Remains Bullish
SPY and QQQ Hold 50-day SMA During Advance
SPY is up around 20% in the last 83 trading days (since the late October low). This advance compares to the move from March to July 2023 when SPY gained 20% in 96 days. SPY moved into a correction after it broke below the 50-day SMA (green dashed line) on August 15th (red arrow). The ETF bounced after this mid August break, but then moved lower into October. Thus, the first break of the 50-day was significant. SPY is currently working its way higher with short pullbacks along the way. The ETF rebounded immediately after each pullback and never threatened the 50-day SMA. The 50-day SMA is currently at 485.63 and will rise further as older data points fall off and newer data points are added. It could be in the 490 area next week. I will leave short-term support at 490 and respect the short-term uptrend as long as SPY holds this level.
QQQ is up around 27% since the late October low (84 trading days). Note that QQQ bottomed a day earlier than SPY. We also witnessed a sharp advance from March to July 2023 as the ETF gained 34% in 88 days. The pullbacks during this sharp advance were short and SPY forged a higher high after each pullback. Each pullback also established short-term support (green lines). SPY is basically stair-stepping its way higher and the short-term uptrend remains as long as short-term supports hold. The most recent pullbacks established support in the low 420s. A close below 420 would reverse this uptrend. This level also corresponds with the 50-day SMA (green dashed line).
Chart Analysis, Setups and Trading Ideas
MDY, the 50-day and the Trailing Stop
The 50-day SMA or another medium-term moving average can also be used as a trailing stop. The chart below shows MDY with the 50-day SMA (green dashed line) and the ATR Trailing Stop (2 x ATR(22)). MDY surged above its 50-day SMA in mid November and held above this moving average ever since (72 days and counting). MDY triggered a flag breakout on February 8th and tagged a new high yesterday. The ATR Trailing Stop is currently at 510.84 and the rising 50-day SMA is at 506.39. Clearly, the stop is wider when using the 50-day SMA. Wider stops are less likely to result in whipsaws, but traders pay a price by giving up more gains.
URA Tests January Low
I highlighted the Uranium ETF (URA) last week as it became oversold within a long-term uptrend. The bottom window shows the Trend Composite in positive territory since June. The middle window shows %B dipping below 0 over the last two weeks. This means URA closed below the lower Bollinger Band (20,2,2). A close below the lower BBand creates and oversold condition, which means there was a pullback within the uptrend. URA is also testing the January low now, which may offer support. URA popped on Monday-Tuesday and then fell back on Wednesday. This fall back created a short-term high upon which to base short-term resistance. A break above Tuesday’s high would reverse the short-term downswing and be bullish for URA.
ZTS Breaks Out and Leads
Zoetis (ZTS) is showing relative strength with a surge over the last two weeks and a breakout on Tuesday. First, the stock is in a long-term uptrend with a new high in late December. ZTS surged 33% from November 1st to December 14th and then fell back with a falling channel into mid February. The stocked gapped down on February 13th after earnings, but immediately recovered, which is impressive. TradingView shows a Red E on the earnings day, which means it was a miss. Traders shrugged off this “bad” news and push prices to their highest level of the month. Rising in the face of bad news is bullish. Overall, I view the falling channel as a correction after a sharp advance, which makes it a bullish continuation pattern. The breakout signals a continuation higher. The red line marks the ATR Trailing Stop at 187.42 (3 x ATR(22)). ZTS surged 4.4% with a long white candlestick last week and this big move should hold. A close below 187.42 would erase this surge and argue for a re-evaluation.
CGSP Surges off Support-Reversal Zone
CoStar Group (CSGP) is another one of these stocks that partook in the broad market advance from late October to mid December and then corrected in 2024. CSGP provide online real estate services and is part of the Nasdaq 100. On the price chart, the stock surged 32% and then corrected with a falling wedge. Prices returned to the breakout zone (blue shading) and found support in the 80-82 area in January and February. This decline also retraced 33-50 percent of the 32% surge. The breakout zone marks a future support zone and the retracement zone marks a potential reversal zone. Taken together, the stock hit a Support-Reversal Zone. Despite hitting this zone, the trend was down as long as the wedge fell. CSGP broke out with a surge above 86 and reversed the short-term downswing. I view the falling wedge as a bullish continuation and consider the breakout bullish. The red hash mark is the ATR Trailing Stop (2 x ATR(22)). There is a long black candlestick with a close at 82.47 on February 22nd. The stock surged after this setback so I am using this close to set my initial ATR Trailing Stop. A close below 82.07 would negate this breakout.
CAH Breaks Out to New High
The Chart Trader Report on February 8th proved to be quite timely with several nice breakouts and follow through. I covered MDY, IPAY, IBB, BLOK, CAH and CVS in this report. The symbols covered are part of the tile and this makes it easy to use the search function at the top. Enter the symbol in the search box and hit ENTER.
There are also links to the previous and next reports at the bottom of every report. This makes it possible to scroll through prior reports and find setups that have yet to trigger breakouts.
The chart below shows Cardinal Health (CAH) consolidating near a new high. A consolidation within an uptrend is a bullish continuation pattern and I set resistance at 107 at the time. CAH broke out last week and followed through on this breakout with further gains this week. The ATR Trailing Stop started at 100.50 and moved higher as the breakout extended. The stop is currently at 105.14 (red line). Chartists can also consider using the 50-day SMA to trail a stop (green dashed line).
