Video and Report Headlines
- Bull Market Sequence
- 4wk High-Low Percent Turns Bearish
- SPY Takes Two Hits as QQQ Stalls
- FAN Breaks Out after Normal Retracement
- PRNT Holds 125-day
- BR Consolidates within Bigger Uptrend
- MCHP Forms Wedge after Resistance Challenge
- NBIX Gets Another Oops Momentum
- NTNX Continues to Lead the Market
- NVDA Tests March Lows
- WatchList Symbols
The next Chart Trader will be posted on Thursday morning, April 11th.
The weight of the long-term evidence remains bullish, but the short-term evidence is starting to turn as the 4-wk High-Low Percent indicator combo turned bearish. I consider this strike two against the short-term bulls. Strike one was the gap down last Tuesday and the bearish engulfing on Thursday. The ATR Trailing Stops for SPY and QQQ hold the key for strike three. Note that the short-term evidence is bullish until we see strike three. Even with short-term breakdowns in SPY and QQQ, the call would be for a correction after the October-March advance. Corrections are like a box of chocolates: you never know what you are going to get. We could see a 50% retracement, a multi-month falling wedge or a choppy trading range.
Bull Market Sequence
The weight of the evidence remains bullish for stocks. The chart below shows the bullish sequence starting with the Zweig Breadth Thrust on November 3rd. See the ZBT1500 Thrust in the middle window. The green arrows on the price chart mark ZBT1500 breadth thrust over the last three years. SPY broke out of its falling channel (red lines) a week after the ZBT Breadth Thrust and also moved above the upper Keltner Channel for a volatility breakout (blue arrow). The Composite Breadth Model (bottom window), which has 14 breadth indicators, then turned bullish on December 7th with a move to +1. The weight of the evidence remains bullish, but there can still be corrections and pullbacks along the way.
Links: Zweig Breadth Thrust and Composite Breadth Model
4wk High-Low Percent Turns Bearish
The next chart shows the 4-wk High-Low Percent indicators for the S&P 500, Nasdaq 100, S&P MidCap 400 and S&P SmallCap 600. I am only focused on the S&P 500 and Nasdaq 100 for signals (see explanation below the chart). SPX 4wk High-Low Percent dipped to -21.87% and NDX 4wk High-Low Percent hit -38.61% on Thursday, April 4th. This is the day SPY formed a large bearish engulfing as it sold off in the afternoon. For NDX 4wk High-Low Percent, this was the lowest reading since late October. This means Nasdaq 100 bore the brunt of selling pressure last Thursday. With both indicators crossing below -20%, the combo is short-term bearish (strike two). I am now waiting on confirmation from the SPY and QQQ price charts.
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 Takes Hits, But Have yet to Break Down
SPY remains in a short-term uptrend as it holds the ATR Trailing Stop (3 x ATR(22)). This red line held since the early November breakout. A decline that breaks this line would be more than 3 ATR(22) values and this would be an outsized decline. In other words, it would show the most selling pressure since October. SPY took two hits over the past week with a gap down last week Tuesday (April 2nd) and a large bearish engulfing last Thursday. A follow through break below the ATR Trailing Stop (call it 510) would reverse the short-term uptrend. This would signal the start of a corrective process.
QQQ hits new highs in March, but has largely consolidated since first exceeding 440 on March 1st. A consolidation within an uptrend is a short-term bullish continuation pattern and this one looks like a pennant. As such, a break above last Thursday’s high (long black candlestick) would be short-term bullish. As with SPY, I am watching the ATR Trailing Stop for signs of an outsized decline that would signal the start of a correction. A close below 429 would be short-term bearish and trigger said signal. Note that both SPY and QQQ experienced outsized declines on August 9th and these signaled the start of a corrective period.
The weight of the short-term evidence is not yet bearish, which means the bullish signal has yet to be proven otherwise. 4-wk High-Low Percent for SPX and NDX triggered bearish. SPY and QQQ are stalling, but have yet to break down and reverse their short-term uptrends. Price needs to confirm breadth before arguing for a correction.
Chart Analysis, Setups and Trading Ideas
FAN Breaks Out after Normal Retracement
The Wind Energy ETF (FAN) is by no means a leader, but the ETF is holding above its rising 125-day SMA and turning up. TAN surged with the broader market in November-December and then corrected into February. This decline retrace around half of the 26% advance with a return to the 125-day (red line). TAN broke short-term resistance with a surge in early March and then fell back into mid March. This pullback held above the rising 125-day as TAN worked its way higher the last three weeks. I am marking resistance at 15.6 and a breakout here would be bullish. Upon a breakout, I would use the 125-day for re-evaluation because a close below this long-term moving average would be negative.
PRNT Holds 125-day
The ARK 3D Printing ETF (PRNT) shows potential because it held the 125-day SMA during the January pullback and worked its way higher the last few months. PRNT surged with the rest of the market in November-December with a 36% surge. The ETF fell back in January with a falling wedge and bounced off the 125-day in mid January. The first higher high breakout was in mid February (green arrow). Even though PRNT did not follow through on this breakout, the cup remains half full because the ETF continues to work its way higher. The dotted green line defines this slow ascent and the solid green line marks support with the mid March low (21.72). The outlook is bullish as long as these two hold.
BR Consolidates within Bigger Uptrend
Stocks were hit hard last week Thursday as SPY open strong and finished weak (-1.2%). This pop and drop created a benchmark high we can use to compare performance. Stocks and ETFs that bounced the last two days and exceeded last Thursday’s high show short-term relative strength (and absolute strength). Broadridge Financial (BR) is one such stock because it surged 3.1% on expanding volume the last two days and exceeded last Thursday’s high (red line). Broadridge Financial Solutions provides investor communications and technology solutions to banks, broker-dealers, mutual funds, and corporate issuers. This short-term price action should also be considered within a larger context, such as the long-term trend and short-term pattern at work. BR is in a long-term uptrend and the stock formed a triangle the last 2-3 months. This is a consolidation within an uptrend and a bullish continuation pattern. The two-day surge is the first sign that a breakout is in the works. A close below last week’s low (198) would argue for a re-evaluation.
MCHP Forms Wedge after Resistance Challenge
The next chart shows Microchip Technology (MCHP) in a trading range the past year (70-95). The stock surged with the rest of the market in November-December and then fell back with a falling channel into mid February. MCHP then surged to 95 with good volume and broke the channel line. This breakout, however, did not last long as the stock fell back in March (as did most tech stocks). This decline formed a triangle-wedge that retraced 50-67 percent of the February-March surge. As such, it looks like a correction after this surge. The red line marks short-term resistance at 90 and a breakout here would be positive. Notice that MCHP was up .60% with volume that was slightly above average on Monday.
NBIX Gets Another Oops Moment
Neurocrine Biosciences (NBIX) is a biotech focused on neurological, neuroendocrine and neuropsychiatric disorders (brain issues). As with all biotech stocks, it has above average risk. The chart below shows NBIX with a breakout in early November, an “oops” moment right after the breakout and a second breakout on December 1st. The oops moment could also be called a shake out, as in one that shakes out weak hands. NBIX dipped below the October low during the early November shakeout, but did not close below the lowest close in late October (green line). Fast forward to current price action and we are seeing a similar scenario unfold. NBIX broke out with high volume on March 21st and fell back below 140 for an oops moment. The stock immediately firmed and there were some high volume up days over the last seven days (green shading). I also see broken resistance turning into support in the 135 area (thick green line). A breakout at 142 would mark the second breakout and be bullish.
NTNX Continues to Lead the Market
Nutanix (NTNX) provides cloud software and solutions, and is part of the Cloud Computing ETF (SKYY). As the chart shows, NTNX is one of the strongest stocks in the market right now. NTNX also has above average volatility and risk. It is up over 150% the past year and sports a steady uptrend. The price-relative (NTNX:RSP ratio) also sports a steady uptrend as the stock consistently outperforms. Short-term, NTNX consolidated from March 8th to April 4th with a falling flag of sorts. The stock then surged 7.72% the last four days and broke out of the flag. NTNX also recorded a new closing high.
NVDA Tests March Lows
Nvidia (NVDA) is the king of AI chips and datacenter technology right now. I featured the stock on January 2nd with a classic cup-with-handle pattern at work. NVDA broke out a week later and pretty much doubled. This is one of those trades that pays for the losers and powers the portfolio. NVDA stalled with the rest of the market in March and could be forming a pennant, which is a bullish continuation pattern. The swing within the pennant is down with Thursday’s high marking short-term resistance. A breakout here would reverse the downswing and increase the chances of a pennant breakout in the 960 area. Should NVDA continue lower and break the March lows, I would mark the next Support-Reversal Zone in the 800 area (green shading). This area marks a 33% retracement of the prior advance and a five day consolidation in late February.
WatchList Symbols
Each week I run through my chart lists to select watchlist candidates. Most of these candidates are in some sort of uptrend (above the 125-day SMA). They also sport some sort of bullish continuation pattern (consolidation, flag, pennant, wedge, retracement, support test, breakout). The charts above were selected from this watch list. Below is a comma separated symbol list.
BR, MOH, MRNA, A, TMO, WAT, IVZ, FFIV, LRCX, ADI, NVDA, MCHP, QRVO, TTD, INVH, NBIX, DXCM, NTNX, TENB, ADP, BL, DDOG, NOW, AVGO, RELY
