The next report will be posted on Tuesday morning, December 10th.
Report and Video Headlines
- Bull Market Environment
- High and Tight Wedges for RTX and FIS
- Healthcare and Biotech Rebound after Setback
- VRTX Tests the October Lows
- JAZZ Holds Breakout after Throwback
- TE Connectivity Holds Wedge Breakout
Publishing on Tuesday and Thursday
Chart Trader is moving back to publishing on Tuesday and Thursday before the open. The focus will remain on stock and ETF trading setups for both swing and position traders. Instead of one big report and video, the idea is to break up the reports into smaller bite-sized pieces.
I always monitor the long-term trend for the major index ETFs (SPY, QQQ), long-term breadth indicators and yield spreads, but their status does not change very often. For example, we have been in a bull market for at least a year. I will continue to provide updates on these, but not as often.
Market Overview
The bull market remains intact. SPY and QQQ hit new highs again on Wednesday. Long-term breadth is bullish with 70% or more of S&P 500 and Nasdaq 100 stocks above their 200 day SMAs. Also note that Nasdaq 100 breadth improved a NDX %Above 200-day moved from 53% to 70% over the last five weeks. Yield spreads remain at narrow levels and show no stress in the corporate credit markets.
High and Tight Wedges for RTX and FIS
Raytheon (RTX) is part of the Aerospace & Defense ETF (ITA) and Fidelity Information Services is part of the FinTech ETF (FINX). These two could not be any different as far as their businesses are concerned. Even so, both industry group ETFs are in long-term uptrends and leading the market. ITA is close to a new high and FINX tagged a new high on Wednesday.
The next chart shows RTX with a steady uptrend since the October 2023 surge. There were three consolidations and breakouts along the way. Most recently RTX hit a new high in mid October and corrected into early December with a small falling wedge. This wedge retraced around 38% of the July-October advance and found support near the September lows (blue shading). I view this as a consolidation within an uptrend and a bullish continuation pattern. A breakout at 122.5 would be bullish and open the door to new highs.
The next chart shows FIS with a similar setup (falling wedge correction). %B became oversold in late November and the stock remains within the falling wedge. A breakout at 86 would be bullish and I would then set my initial re-evaluation level at 83. Notice that %B became oversold three times during the June-July consolidation. This is because the Bollinger Bands narrowed as this consolidation extended. Narrowing bands make it easier for price to close below the lower band, and this is when %B dips below 0.
Healthcare and Biotech Rebound after Setback
The Biotech SPDR (XBI) and Healthcare SPDR (XLV) fell in reaction to the RFK Jr nomination to the department of Health and Human Services (pink shading). The nomination process is still a fluid situation, but both ETFs rebounded and then consolidated. The chart below shows XLV with a falling channel correction that retraced around 50% of the prior advance (late October to early September). XLV bounced back to the upper line and stalled the last few days with a small flag. A breakout at 148 would be bullish here.
The bottom half shows the Biotech SPDR (XBI) advancing from November to February and then consolidating the last nine months. This could be a massive Ascending Triangle, which is a bullish continuation pattern. A breakout at 104 would be bullish. Short-term, XBI also has a small flag and a breakout at 101 would trigger this pattern.
VRTX Tests the October Lows
Vertex Pharmaceuticals (VRTX) is a biopharmaceutical company based in Boston. I featured this stock as it set up into early October and as it broke out. VRTX hit a new high and then plunged in mid November. VRTX remains on my list because the long-term trend is up and it is trading in a Bullish Setup Zone. On the price chart, VRTX is firming in the 450 area (blue shading). This area marks support from the lows in early October and early November. This zone also marks a 50-61.8% retracement of the prior 32.9% advance. %B became oversold as VRTX fell into this Bullish Setup Zone and moved above zero on November 20th. Thus, we have an oversold trigger. I am marking short-term resistance at 470 and a breakout here would be bullish. I would then mark re-evaluation support at 445.
JAZZ Holds Breakout after Throwback
The next chart shows Jazz Pharmaceuticals (JAZZ), which is a biopharmaceutical company headquartered in Ireland. JAZZ formed a base from May to October and broke out with a big surge in early November. Defining a breakout as a break above the prior high, this was the third breakout since late August. JAZZ fell back to the breakout zone in mid November with a throwback. Broken resistance levels turned into support (blue shading) and this zone also marks a 50-61.8% retracement of the 20% surge. JAZZ bounced off this level to keep the breakout alive. In addition to the breakout, the PPO(10,200,0) exceeded 3% to signal an uptrend in early November. A long-term uptrend could be starting and I am marking re-evaluation support at 115.
TE Connectivity Holds Wedge Breakout
Headquartered in Ireland, TE Connectivity (TEL) provides connectivity and sensor solutions for the distribution of power, signal, and data. This under-the-radar stock is part of the Technology SPDR (XLK). TEL hit a new high in July and then corrected into October with a falling wedge. This wedge retraced around 61.8% and found support just above the February-April lows (blue shading). TEL broke out in late October and then fell sharply into mid November. It held the October lows, which mark support at 143, and bounced again the last two weeks. The stocks is still trading near the breakout and this breakout remains in play. Re-evaluation support is at 143.
