Chartsmarter Insights

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.

"Asset" or Liability: The asset managers of the finanical group are drumming to their own beat. Some have acted well and are trading near 52-week highs like leader BAM, but this one looks vulnerable with bearish divergence as 3 lower RSI highs corresponded with 3 higher PRICE moves since late last October. It did complete a bullish morning star on 2/13 and the next session gapped up completing a bullish island reversal (after the gap down on 2/3) but these are more reliable signals near lows. Add to that it filled in an upside gap from the 1/31 session and Tuesday traded into a bearish engulfing candle from 1/30. Below is peer BLK which has been behaving a bit weaker, where BAM is 3% off its most recent 52-week highs, Blackrock is 11% off its own annual peak. It does have some positive attributes but has to hold Tuesday's intraday low of 959.07 on a CLOSING basis. The notes on the daily chart are self-explanatory (two spinning tops on 1/30 and 1/31 after a double bottom breakout pivot of 1057.59 were a canary in the coal mine for the coming weakness with such a quick breakout failure) and notice there is some room lower if that stop is taken out on the MONTHLY chart to the very round 900 number to retest a prior cup base breakout (notice the doji candle that started the pattern in December 2021 which led to a 400 handle haircut. The only other doji since 2017 was last December. 

Benefit of the Doubt: Although I am not an index trader, I admit I have been hesitant about being sanguine regarding the Nasdaq's prospects. I still am a bit but my tune is changing quickly. My big green light will be a decisive CLOSE above the very round 20000 figure. Notice it is still trapped between the 19000 and 20000 range basically since November. Contrary to many technical beliefs that the more times a line is touched the greater the support or resistance becomes, I think the opposite. The Nasdaq in my opinion is becoming more familiar with this PRICE territory and therefore more comfortable. Notice the Bollinger Bands are tightening, much like they did just before the election, and that is a good indication that a big move is imminent (the direction is ambiguous). Comforting the bears belief that 20000 is a brick wall is the numerous dubious candlesticks there including a harami on 12/17, a doji on 1/6, and a dark cloud cover on 1/24. It has not been able to record 3 straight daily CLOSES above 20000, but this week has the first WEEKLY CLOSE above 20000 after 5 prior weeks were above it intraweek dating back to last December. We are now past earnings season for most of the notable tech names and survived, another notch the bulls can put in their hat. Paint me bullish. The onus is on the bears here and next week feels like it will determine the near-term trend for the first quarter at least. The long weekend will not provide much comfort for the uneasy grizzlies.