Video and Report Headlines
- PANW Plummets after Going Parabolic
- 4wk High-Low Percent Remains Bullish
- SPY and QQQ Hold Support
- XLRE Breaks Out of Falling Wedge
- URA Becomes Oversold within Uptrend
- ROBO Consolidate After Big Advances
- KBWB Holds Double Bottom Breakout
- TDY Consolidates after Breakout Surge
The next Chart Trader will be posted on Tuesday morning, February 27th.
Stocks fell back this week with declines over the last two days, but the futures are pointing to a sharply higher open after Nvidia exceeded expectations. Once again, pullbacks are very short-lived as the market quickly rebounds after each dip. These dips are not even that deep. Overall, we are in a bull market and the short-term trends are up for the major index ETFs. Thus, there are no signs of a correction right now.
PANW Plummets after Going Parabolic
It is, however, not all roses in the stock market. Palo Alto Networks, which is one of the darlings of the Cybersecurity ETF (CIBR), fell 28% on Wednesday. PANW was up 187% this year and up 75% since mid August. If this was not enough, it went parabolic here in 2024 when it gained 32% in just 5 weeks (January 8th to February 9th). Timing a decline during a parabolic advance is almost impossible, but we should be aware of the risk when price advances become parabolic in nature. The chart shows PANW retracing half of its 187% advance and returning to the late November breakout zone (blue shading). This puts it in a Support-Reversal Zone. I would like to give the stock some time to settle and will keep it on my watchlist for a future setup.
4wk High-Low Percent Remains Bullish
There is no change with S&P 500 4-wk High-Low Percent (bottom window). The indicator turned bullish with a move above 20% on January 29th and remains in bull mode. A move below -20% would turn this indicator short-term bearish and argue for a pullback. The middle window shows $SPX %Above 50-day SMA peaking on January 2nd and falling into February. It is currently at 63.42%. Fewer stocks are partaking in the current run, but more than half remain above their 50-day SMAs.
SPY and QQQ Hold Support
SPY remains in a short-term uptrend. The advance is steep, but the ETF rebounds immediately after every short pullback (blue arrows). SPY fell sharply on February 13th and again immediately rebounded. The ETF also fell on Tuesday-Wednesday and is poised to rebound again on Thursday because the e-mini is up 1%. Support remains at 490. The short-term uptrend, however steep and overbought is may seem, is still strong and intact as long as 490 holds.
The next chart shows QQQ within a strong uptrend since the initial thrust ended on November 20th (gray arrow). As with SPY, QQQ bounces immediately after the short pullbacks (blue arrows). Overall, the ETF tagged a new high near 440 on February 9th and then fell sharply on February 13th. QQQ immediately bounced, but this bounce did not last long as the ETF fell back on Monday and Tuesday this week. A hammer formed on Wednesday and the futures are pointing to a strong open for Thursday (+1.8%). This reinforces support at 425. A close below this level would reverse the short-term uptrend.
Chart Analysis, Setups and Trading Ideas
XLRE Breaks Out of Falling Wedge
The Real Estate SPDR (XLRE) took part in the broad market advance with a 27% surge and a break above the July high (higher high). While SPY and QQQ continued higher in 2024, XLRE corrected with a falling wedge that retraced 33-50 percent of the prior advance. XLRE is underperforming in 2024, but the pattern and retracement amount are typical for corrections within bigger uptrends. The ETF gapped down on February 13th and immediately recovered with a surge that broke short-term resistance (breakout). I view this breakout as bullish and would re-evaluate on a close below 37.50 (green line).
URA Becomes Oversold within Uptrend
The next chart shows the Uranium ETF (URA) with Bollinger Bands and %B in the indicator window. URA has been in a steady uptrend since spring 2023. The green arrows show when the ETF dips below the lower Bollinger Band (20,2). These bands are 2 standard deviations above and below the 20-day SMA. A dip below the lower band signals an oversold condition that could lead to a bounce. Also notice that %B (20,2) dips below 0 when the close is below the lower band and exceeds 1 when the close is above the upper band. I am only interested in oversold readings when the bigger trend is up. Returning to the price chart, URA fell with a steep falling wedge in February and a breakout would reverse the short-term slide.
ROBO Consolidates After Big Advance
The Robotics Automation ETF (ROBO) is forming a triangle after a 27% advance. A consolidation after a sharp advance is typically a bullish continuation pattern. As such, a break above the February highs would be bullish and argue for a move to new highs. The February lows mark first support and a break here would be bearish.
KBWB Holds Double Bottom Breakout
The Finance SPDR (XLF) is surging to new highs and leading the market here in 2024 (+5.4%). The Regional Bank ETF (KRE), however, is lagging the market this year with an 8.4% decline. This performance discrepancy puts the KBW Bank ETF (KBWB) in the middle with a .6% decline. Overall, I think the cup is half full for KBWB because it broke Double Bottom resistance and is holding above this breakout zone. The ETF is basically consolidating after a 38% advance. This consolidation narrowed in February and a triangle is taking shape. A breakout at 49.5 would be bullish and argue for further gains. I would then re-evaluate on a close below 47.
TDY Consolidates after Breakout Surge
Teledyne (TDY) is part of the Aerospace & Defense ETF (PPA), which is trading near a new high and up 3.6% this year. TDY is lagging the market and its group this year because it corrected after a big advance. Overall, the stock surged 22% and then retraced 33-50% with the pullback this year. A sort of wedge/triangle formed and I view this as a bullish continuation pattern. A breakout at 435 would be bullish and I would then set re-evaluation support at 420.
