Douglas Busch

Tech Proxy:  We all know the "creativity" of some of these major S&P sector ETFs with their stock selection. My favorite thus far is UBER being a transport name and a top 3 holding in the XLI (industrials) even though it is well known as a software play. Let's be honest, nearly every company is a technology play, becoming one, or losing ground. Continuing with our theme of looking at the mega caps during this fortified earnings week, today we take a look at AMZN. This one trades a bit wide and loose but is right at an infection point honing in on the very round 200 number and is presently right at a cup with handle pivot. If it can get above there will have to deal with bull flag break DOWN and the doji candle from 7/9. Notice on the MONTHLY chart it is now back above the cup base trigger of 188.31 and that breakout carries a measured move to 295. That, if it occurs, could happen in late 2025 or sometime in 2026. That bullish hammer candle in August shook many weak shareholders out. 

Same Old Story: For the last 5 months, not such a small sample size, software has outshined the semis. Perhaps that may change with a stellar AMD report Tuesday after the bell, but remember once trends get started they are more likely to resume than reverse. The WEEKLY chart below shows the powerful 3-week tight pattern with the last 3 weeks all CLOSING within just .62 of each other and that is after a double bottom breakout. There may be some pushback near the very round par number in the short term but this fund should power higher into year-end. There are things to like on the daily chart with the break above the bull flag aligning with the very round 90 number and it is for the moment brushing off the bearish gravestone doji candle from 10/25 and the spinning top and then the bearish engulfing candle on 10/14-15. On the MONTHLY chart, the bull flag breakout above 89 is still well intact and carries a measured move to 131.

Semi Step Child:  The red-headed stepchild in the semiconductor space to NVDA is AMD. Many may not think that is fair, but NVDA is trading just 2% off its most recent 52-week highs while AMD is 30% off its own annual peak. Notice here how the overlapping PRICE chart shows the divergence between the two greater than it has been in the last 6 months as the last 2 weeks their paths have bifurcated. It is not a reason to not warm up to AMD however, another mega-cap with earnings Tuesday after the CLOSE. Below is the daily chart and I admire the doji candle at the very round 150 number after its third double-digit drawdown since this summer. Notice after each drawdown it has made progress and it has made higher lows since the 35% July swoon. On the WEEKLY chart if the lows from that doji session hold up a double bottom base with a pivot of 187.38 is setting up. It is easy to spot the near-term tops on the WEEKLY chart too with the completion of the bearish evening star and engulfing patterns in March and July.

Industrial Reprieve: The industrial space last week put up a lackluster performance falling 2.8%. It bested just healthcare and the materials. If one was to peek at the WEEKLY chart this shallow pullback could be a good opportunity. Over the last 4 months, it declined just 2 other times, falling 4.2 and 2.8% in the weeks ending 9/6 and 8/2. Both of those CLOSED at the lows for the WEEKLY range like last week, although this most recent one did complete a bearish evening star pattern, but the fund continued its ascent upward the very next week. Earnings came in which was the main cause of the potential technical damage and the largest holding in GE slumped 9% on Tuesday. It is being comforted at the moment by the 50-day SMA, but it looks vulnerable and is now below the bull flag breakout. Others that disappointed, all on Thursday, included HON which slipped 5%, TXT by 6%, and CARR by 9%. Each of these names looks like it will need time to repair and perhaps that will weigh on the space. The best-case scenario for bulls is for the XLI to trade sideways and not continue its descent lower on the daily chart below after falling every day last week.

"FACE"ing the Music:  Next week the Mag7 will all be REPORTING earnings and each day we will take a look at one in our opening paragraph. META's announcement will come on 10/30 before the open and I still look at the company as Facebook. The daily chart below is a solid one as it drifts a bit lower, now 6% off its most recent 52-week highs after a blockade at the very round 600 number (it has been trading between the very round 500-600 numbers since the bullish hammer candle on 9/11). There are some technical difficulties it has to address with the WEEKLY chart showing last week completing a bearish evening star with an extremely taut range the week ending 10/11. The MONTHLY chart has recorded a very robust run from the very round 100 number to the 600 figure, a gain of 500% in just 2 years. Give this chart extra credit however for ignoring the back-to-back doji candles, in September-October 2023, and again this August. These candles often are adept at signaling potential trend changes from the prevailing direction.