Douglas Busch

"Bit" by Bit:   As everyone fawns over NVDA tonight, Bitcoin is probably at the back of plenty of investor minds. PRICE is quickly descending to the 200-day SMA with an RSI in the mid-20s and it should see at the very least a dead cat bounce soon. The quick failure of a double-bottom breakout of 102,750 was a good indication that a drawdown was forthcoming as we know the best breakouts tend to work right away, and those that fail rapidly are red flags. Two of the main individual names aligned with the asset are MSTR and COIN. With the former, candles have been helpful determining risk on and off with the ugly bearish engulfing on 11/21, a session that witnessed a 150 handle daily range which was above the very round 500 number intraday but CLOSED below 400 (Wednesday registered a bullish piercing line). A bullish harami cross (doji) on 1/2 started a small run that can now be interpreted as a double bottom base if the stock can find its footing here. Below is the daily chart of COIN and this looks like selling pressure could be exhausting itself if it can bounce at the very round 200 figure. On its WEEKLY chart, the last 2 CLOSES below the 50-WEEK SMA produced very quick comebacks with PRICE doubling from 50-100 in and then from 150 to beyond 300. There is still plenty of week left with NVDA this afternoon but is something to think about. This is a trendless environment, with a downward bias, and it makes sense to keep size very small until a formidable direction ensues.

Equipment Check:  Healthcare has been sprouting its wings overall with the XLV sporting a bullish inverse head and shoulders formation. A break above 149 could see a potential measured move to 163. Looking inside the diverse space, pharma has been leading biotech since the election last year, and that could be a sign of "risk off" as long as that relationship remains in play. The PPH trades in an illiquid fashion but does give a good indication of what is happening beneath the surface and it is now distancing itself from its 200-day SMA. Below is the daily chart of the IHI and this is showing excellent relative strength against sector rivals. This ETF is trading at 52-week highs, while the PPH, XLV, XBI, and IHF are all trading 7-14% from their recent annual peaks. The WEEKLY chart traded very tautly and it is just above a 3-week tight pattern with the 3 weeks ending between 1/24-2/7 all CLOSING within just six pennies of each other, not a typo. From that type of coiled digestion can come explosive moves upon breakout. The bears are not giving up however as the breakout has not made much headway, as we know the best breakouts tend to work right away, and the last 4 WEEKLY candles were two shooting stars followed by the last 2 weeks registering spinning tops. The burden of proof is still on the bears though as PRICE has not broken down yet in any meaningful way.

Future Gazing: On a YTD basis energy continues to perform well as the XLE has risen 6%, the third best major S&P sector actor of 11 with 2 months in 2025 almost in the books (notice the defensive nature with 3 of the top 4 being healthcare, energy, and utilities and tech and discretionary lagging). I have been watching the futures and it seems no one has a bullish take on this and that could be a reason alone for this to move higher, but if the bear flag is taken out I think it could move toward 68 before a double bottom base potentially forms. Looking at some influential names inside the space CVX is just 6% from its most recent 52-week highs while chief rival XOM is double that by 12% from its annual peak. Technically XOM may have a better set-up if it can cleat a 112 ascending triangle pivot which would carry a measured move to 120 (notice the near term tops were called with an evening star and doji on 10/8 and 11/22). Comparing the two giants in the OIH with SLB:HAL ratio chart we see bifurcation too with the former having a superior 2025 thus far against Halliburton. Judging them on their own merit SLB should be overweighted against it as an inverse head and shoulders formation has set up. A break above 43 could see a swift move to the very round 50 number and I feel that quick move from the oversold 30 to the overbought 70 RSI number means something and notice the fine behavior since the doji candle on 12/20 and also the bullish morning star completed on 12/4.

Sixth Time the Charm? Long-time readers of mine know my affinity with round number theory. The daily chart below shows the Nasdaq now at the 20000 figure for a 6th time, not a typo, and here shows how it is retreating very little this time around which could be a very good sign (the fourth time completed a bearish island reversal with a gap down on 1/27 after the gap up on 1/22 and remember gaps for indexes are rare so for two to happen so quickly is meaningful). Bears will point to Tuesday and Thursday this week being bearish hanging man candles, but I think this could be the start of a handle on this potential cup base. Friday will be very interesting to see if the week can CLOSE above 20000 for the second straight week. Before last week it was above 20000 five weeks between weeks ending 12/13-1/24, yet zero CLOSED above it. A decisive move tomorrow above it would be a break above a bull flag carrying a measured move to 23000. Next month bullish seasonality kicks in with the last 4 years all CLOSING the month above where it started with an average gain of more than 3%, its third strongest return since 2020.

Hit Me Baby One More Time:   The biotech space continues to live up to its widowmaker moniker (and Britney Spears reference) as every time it feels ready to go the floor drops out underneath. Could it be ready to break hearts "one more time" as it nears a collision course with the 200-day SMA above? That secular line is now sloping higher and a break above it in the short term could commence a beachball-held underwater breakout. PRICE must confirm and the MONTHLY chart is still holding a break ABOVE a bearish inverse head and shoulders formation and we know from FALSE moves can come fast ones in the opposite direction. Some individual long candidates here include the WEEKLY chart of SRPT which this week bounced off the very round par number as it undercut last November's lows creating a legitimate double-bottom base with a potential add-on pivot of 138.91 (enter here with a stop below 98). I am not a big personal fan of single-digit names, but BCRX recently cleared a WEEKLY inverse head and shoulders trigger of 9 which carries a measured move to 14. The DNLI WEEKLY chart looks good against the very round 20 number with a bullish engulfing candle there the week ending 1/17 and a hammer off 20 last week too.