ETF Trends, Patterns and Setups – Dozens of ETFs in Trend-Monitoring Phase, Banks Break Out, XBI follows IBB and Metals Make a Move (Premium)

There are dozens of ETFs in the trend-monitoring phase because their setups evolved in February-March, they broke out at least a month ago and moved higher the last two months (or more). There is no real analysis to be done with these ETFs because they are in their post-breakout moves (trend-monitoring phase). Today’s report will show charts for these ETFs first.

The second part will focus on ETFs with setups/breakouts here in April. Some of these ETFs broke out in early April and are already up substantially. Others broke out over the last week or two and these breakouts are still fresh. This week we are seeing breakouts in small-caps (IWM, IJR), banks (KRE, KBE), energy (XLE, FCG), metals (XME), betting (BETZ), cannabis (MJ) and biotech (XBI). We are also seeing bullish pennants in GLD and SLV.

You can learn more about my chart strategy in this article covering the different timeframes, chart settings, StochClose, RSI and StochRSI.

Uptrend, New High this Week


There are dozens of ETFs in the core list that are in the trend-monitoring phase. They are hitting new highs this week and up substantially over the last four to twelve weeks. The setups and triggers are in the past and there is nothing to do except monitor the trend and consider an exit strategy. Trend-followers can consider an exit when the bigger trends reverse. Momentum players can consider an exit when these start loosing upside momentum and/or underperforming. Traders can consider booking some profits and using a trailing stop for the remainder. The key is to plan your trade and then trade according to that plan. The first groups show chart examples with breakouts, post-breakout extensions, big gains and the ATR Trailing Stop for reference.

Late February Breakout, New High this Week


Early March Breakout, New High this Week


Early-Mid March Breakout, New High last Week


You can learn more the StochClose indicator and strategies in this post.

Late March Breakout, New High Last Week


Early April Breakout, New High this Week


You can learn more about ATR Trailing stops in this post,
which includes a video and charting option for everyone.

April Breakouts, Extension Higher


The Copper Miners ETF (COPX), Copper ETF (CPER), DB Base Metals ETF (DBB) and DB Agriculture ETF (DBA) all broke out in early-mid April and continued higher the last few weeks. Spot Copper, DBB and DBA hit new highs and COPX (upper right) is close to a new high. The red and brown lines show the ATR Trailing Stops for reference. The stops are tighter for Spot Copper and DBB because the patterns were tighter.  

Late April Breakout, New High


The Metals & Mining SPDR (XME) and Sports Betting iGaming ETF (BETZ) broke out this week. The first chart shows XME with a new high in mid March, a sharp pullback to 26 and a rebound. The candlestick chart focuses on this rebound as a consolidation pattern formed (blue lines). It is not a picture-perfect flag or pennant, but the trading range does represent a consolidation after the surge (green line). This is the post-surge rest and the breakout signals a continuation higher. Also note that 50% of XME components are in the steel industry and the Steel ETF (SLX) is hitting new highs as well.

The Sports Betting iGaming ETF (BETZ) consolidated from mid February to April and broke out of the pattern this week. Price is above the rising 200-day, which did not start until March 22nd because this is a relatively new ETF. Anyhow, a consolidation within an uptrend is…a bullish continuation pattern and the breakout argues for further gains.

Triangle Consolidation, Late April Breakout


I covered the triangles and Bollinger Band squeezes in the Russell 2000 ETF (IWM) and S&P SmallCap 600 SPDR (IJR) in a weekend commentary and I also covered these two in a video on Wednesday (along with KRE). The setups are pretty much the same: a big move from late October to mid March, a triangle consolidation and a breakout. We don’t need Bollinger Bands to figure out what is happening here because the narrowing range makes it clear that volatility is contracting. Furthermore, a consolidation within an uptrend is a bullish continuation pattern and the triangle breakouts are bullish until proven otherwise. The chart below shows IJR breaking out of the triangle and exceeding its mid April highs. It did not break the upper Bollinger Band, but you can’t have it all.

The red line on the bar chart (108.21) is the ATR Trailing Stop, which is 2 ATR(22) values below the highest close since the breakout. There are two ways to approach this. First, use an ATR Trailing Stop. Second, use last week’s low as an initial stop (106.09) and then trail should price continue higher. The candlestick chart shows a bullish engulfing and follow through over the last six days.

The next chart shows KRE with a triangle breakout on the bar chart. Notice that the dip below the 50-day SMA (green dashed line) was not a bearish signal. Instead, it signaled a pullback within the bigger uptrend and this is a mean-reversion opportunity. Also note that RSI dipped into the oversold zone twice (turned blue) and moved above its mid April high. This is a momentum breakout of sorts. And finally, the candlestick chart shows a piercing pattern and follow thru last week. The chart points to higher prices right now and a break below last week’s low would call for a reassessment.

Oversold, Short-term Breakout


The Uranium ETF (URA) was highlighted in the weekend video (55 min mark) as it became oversold within an uptrend. First, the long-term chart in the upper left shows a massive gain since late October. Second, the bar chart shows a zigzag higher since late February with RSI dipping just below 50 on each zag lower. Third, the candlestick chart shows the most recent zag lower and a short-term breakout this week. Also notice that a piercing pattern formed on Thursday-Friday.

Sharp Pullback Early March, Big Triangle, April Breakout


The Nasdaq 100 Next Gen ETF (QQQJ) and Russell 2000 Growth ETF (IWO) were featured on Tuesday because they showed short-term relative strength. Both broke above their mid April highs before QQQ and SPY. The chart below shows IWO retracing 50% of the prior advance with a sharp decline into early March and then forming a triangle consolidation. IWO broke out, RSI broke out of its range and these breakouts are bullish until proven otherwise. The short brown line at 294.66 shows a wider ATR Trailing Stop, which is 3 ATR(22) values below the highest close since the breakout. I like to align the initial stop with the low just before the breakout. The short red line is 2 ATR(22) values below the highest close and could be too tight (whipsaw). There is no right or wrong answer when it comes to placing stops. It depends on your trading/investing objectives, timeframe and preferences.

Breakout within a Bullish Continuation Pattern


I have been watching the Alternative Harvest ETF (MJ) and Pure Cannabis ETF (YOLO) as both consolidate after big moves. MJ is stronger than YOLO because it held above the early March low and formed a triangle. YOLO, in contrast, broke the early March low with a falling wedge. I will focus on MJ because of this relative strength.

The chart shows MJ with a triangle consolidation after a big advance, even without the Reddit randomness above 27. This triangle is a consolidation within an uptrend and a bullish continuation pattern. With this bullish bias, I was watching the candlestick chart closely for signs of a reversal within the triangle. A piercing pattern formed last week and MJ followed through the last few days with a breakout. The breakout within the triangle increases the odds of a triangle breakout.

Note that MJ has above average volatility and risk. The lower window shows Historical Volatility (21), which is annualized 21-day volatility. It exceeded 100% from February 12th to March 10th and is currently at 27%. Here are some historical volatility references: SPY (6.8%), IWM (16.3%), ICLN (30.9%), TSLA (45.3%). This is something to consider when sizing a position. In other words, a 5% position in MJ carries a lot more risk than a 5% position in SPY.

Failed Breakout, Looking Shaky CARZ

The Global Auto ETF (CARZ) was looking like a new leader with the triangle breakout on April 5th, but the ETF is struggling since the breakout attempt. There was no follow through and the ETF fell rather sharply last week (red zone). The overall trend is up and CARZ remains within a larger consolidation, but I would be concerned because the ETF is not acting the way it should be. In other words, I would expect price to be above 59 three weeks after a breakout. The brown line shows the ATR Trailing Stop (3 ATR(22)) for reference.

The Autonomous EV ETF (DRIV) also sports a triangle breakout and is holding this breakout for the most part. The brown line shows the ATR Trailing Stop (3 ATR(22) for reference.

Broke Mid March High, Short of New High


ETFs in this group led the April rebound because they broke above their mid March highs. Note that all of the ARK ETFs remain below their mid March highs and have yet to break out. The Software ETF (IGV) is the leader in this group with the biggest gain and strongest breakout. The others broke out, fell back to the breakout zones last week and bounced this week. Last week’s lows now mark first support to watch going forward. The charts below show the Cloud Computing ETF (SKYY) with support in the 100 area and the Video Game eSports ETF (HERO) with support at 32.

Short-term Gap-Breakout


The Wind Energy ETF (FAN) and Global Clean Energy ETF (ICLN) are the strongest within the clean energy group. The first chart shows FAN retracing 50-67% of the prior advance with a very sharp decline into early March and rebounding into late April. The rebound remains in play with a rising channel and I am using last week’s low to mark support. I remain bullish, but am always on the look out for what could prove my bullish thesis otherwise. A rising channel that retraces 50% of the prior decline could be a counter-trend bounce. Right now the channel is rising so there isn’t a problem. A move below 22, however, would break channel support and call for a re-evaluation.

As noted the last few weeks, the Global Clean Energy ETF (ICLN) held up better than the Clean Energy ETF (PBW) and Solar Energy ETF (TAN) because it held well above the mid March low in April. PBW formed a lower low and TAN tested the prior lows. This is why I chose to focus on ICLN.

The chart shows ICLN firming just above the rising 200-day with a triangle. After a decline, a triangle is a bearish continuation pattern. However, sometimes they break the other way and ICLN broke out to the upside. The candlestick chart shows a surge, 67% retracement and gap-breakout last week. The chart is bullish and I must now decide what it would take to prove the bullish thesis otherwise. I could use the April lows as support, but these seem a bit close (tight) for an ETF with above average volatility. Thus, I think a close below the rising 200-day would warrant a re-evaluation.

Surge off Rising 200-day, Short-term Breakout


Unsurprisingly, the charts for the Biotech ETF (IBB) and Biotech SPDR (XBI) are quite similar when looking at the big picture. There are, however, some slight performance differences over the last two months, but both charts look bullish with recent breakouts. Note that IBB is weighted by market cap with the top ten stocks accounting for 45.5%. In contrast, the top ten stocks in XBI account for just 8.3%. XBI is basically an equal-weight bet on the entire industry and IBB is a bet on the heavy-weights.

Both charts show a surge to new highs from late October to mid February, a sharp decline that retraced around 2/3 and price firming near the rising 200-day. IBB held up slightly better with higher lows the last two months and a breakout last week. XBI dipped below its rising 200-day a few times and broke above its mid April highs this week. RSI formed a bullish failure swing on both charts.

Bullish Pennant after Short-term Breakout


The Gold SPDR (GLD) and Silver ETF (SLV) came to life with breakouts in early April and these breakouts are holding. The bar chart shows GLD with a double bottom breakout and RSI bullish failure swing. GLD is still below the 200-day SMA, which turned lower the last few weeks, but notice that it bounced off a reversal zone on the line chart (upper left). On the Heikin-Ashi chart, GLD formed a pennant this past week and a breakout at 167.5 would be bullish.

SLV formed a big triangle on the long-term line chart (upper left) and this is a big bullish continuation pattern. Within the triangle, the ETF formed a falling wedge that retraced 67% of the prior advance on the bar chart. SLV broke out of this wedge in early April and then stalled the past week. Notice that a pennant is also forming on the Heikin-Ashi chart. The pennants in GLD and SLV are small and short-term.

Falling Wedge Correction, Late April Breakout


Even though spot oil is hitting a long-term resistance zone, the US Oil Fund (USO) recently broke out of a triangle and this breakout is bullish. I am going to miss this one, but will point it out nonetheless. USO became short-term oversold as RSI dipped into the 30-50 zone and turned blue. After firming for a few weeks, USO broke out with a surge in mid April (see candlestick chart). There was a dip after this breakout and another surge this week to trigger the triangle breakout.

We are seeing falling wedge breakouts in the Energy SPDR (XLE), Oil & Gas Equipment & Services ETF (XES), Oil & Gas Exploration & Production ETF (XOP) and Natural Gas ETF (FCG). The first chart shows XLE retracing a little less than half of the prior advance with a falling wedge and breaking out this week. The pattern and retracement amount are typical for corrections within a bigger uptrend. The second chart shows FCG with a similar setup, but note that historical volatility is 31%!

Thanks for tuning in and have a great day!

-Arthur Hill, CMT
Choose a Strategy, Develop a Plan and Follow a Process

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