ChartSmarter Wednesday Game Plan 3/14/18

Markets took one on the chin Tuesday as the Nasdaq slumped 1%, ending a 7 session winning streak. It registered a nasty bearish engulfing candle at all time highs on strong volume, and time will tell but perhaps this is a bear trap at the breakthrough the double top at 7500 last Friday. It was a level much talked about and maybe it is just volatility returning, which we sometimes forget goes both ways. The S&P 500 dropped .6% and it to looks to be receding after its own break above a symmetrical triangle, and keep in mind when breakouts fizzle so quickly after a nice move obviously it is not a good sign. The Russell 2000 backed off after coming within 9 handles of a cup base breakout, and quite frankly it and the Nasdaq have posted nice runs of late so a little backing off could be warranted. The VIX on the other hand which has been portrayed by many in a negative light, and it came close to recapturing its 50 day SMA and has defended the cup base trigger of 15 very well. Last Thursday and Friday which completed a 6 day losing streak did have nice long lower tails, and it could be well rested for a move north. Today recorded a spinning top candle which often signals a weakening on the prevailing trend.

Looking at individual sectors the leading groups were hit the hardest as technology and financials were the weakest as the XLK and XLF both fell by 1.1%. And the leading groups were the defensive oriented spaces with the utilities, healthcare and staples all outperforming. We have mentioned the XLU stalling right at its previous breakdown below a bear flag that aligned with the very round 50 number. The longer it stays put here and refuses to drop the more bullish it will be. A positive first step for the ETF will be a move back above the 50 day SMA which it has been underneath since mid December last year. The XLF seems a little gun shy once again at the round 30 number, which has recorded just 4 CLOSES above in 2018 thus far. The XLE is flirting with its 200 day SMA, and is dominated by XOM and CVX, and I can see how one could interpret the pattern as a bearish head and shoulders. The bear flag was becoming a bit long in duration, but again this is not an instrument I have a very strong opinion on.

The semiconductors remain hot, but there has been a little bit of rest this week, well deserved rest at that. Some crazy action this week in the news and on the charts with the AVGO QCOM announcement and MU screamed higher by almost 9% Monday, (it rose more than 11% last week in the strongest weekly volume since the week ending 10/11/13) a day after a bearish engulfing candle last Friday, and a good example of why PRICE action is and always will be your best indicator. Below is the chart of another semiconductor MKSI and how it was profiled in our Tuesday 3/6 Game Plan. Here is a good look at what we refer to as "clusters of evidence" where a couple triggers will come into play in the same area. For this chart it was the bull flag finding support at a prior cup base breakout level. Tuesday stopped an 8 session winning streak, and recorded a bearish engulfing candle after the prior days spinning top. Some sideways trade here will be in order for the bulls after a powerful recent move.

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ChartSmarter Tuesday Game Plan 3/13/18

Markets were slightly bifurcated to begin the week Monday as the Nasdaq pressed on with its now 7 day winning streak adding .4%. The Russell 2000 inched higher by .2% and is now closing in on a 1615 cup base trigger that began on 1/24 and would negate a bearish engulfing candle from that session. The Dow, a price weighted index, was held down by its most expensive component BA which lost 10 handles today. It is a small start but when looking at the VIX the bull shad to be inspired as it reversed at its 50 day SMA today. It did end a 6 session losing streak with a bullish inverted hammer candle, but lets see how this week plays out. It is still holding the 15 cup base breakout trigger so one has to be mixed with the action here. The auto group was a great actor Monday led by TSLA. Of course it is a cult stock but it is carving out a nice cup base that found support at the very round 300 number last July, from last November-December and this February.

Looking at individual groups that led Monday it was technology and the cyclicals with both the XLK and XLI higher by more than .3%. The utilities rounded out the top 3 and this sector has seen a real struggle between bulls and bears as it is either near the top of the leaderboard or the bottom. The bears still have the long term control of the ETF on a leash, but the short term is making a noteworthy battle. Lagging in a significant way were the industrials as the XLI surrendered 1.2% as its largest component BA, more than 8%, fell nearly 3% today. In fact 9 of the top ten stocks in the ETF fell Monday, with the lone exception being GE, which has been a dismal performer down more than 50%, without a 2:1 split (apologies for any long shareholders at my attempt of humor). Energy is attempting to make some positive strides as individual names in the space are trying to make a name for themselves. The XLE had the look of a bear flag, but the pattern is becoming a little long in the tooth. Avoid playing the ETF, rather search for names outperforming the overall arena.

Healthcare is a group that has not been getting a ton of attention with tech and financials deservedly capturing most of the chatter. That gives those who are focusing on the sector some advantage. Sure the IBB is on a 7 session winning streak, albeit with a doji candle Monday, but looking after more undiscovered gems is very worthwhile. Below is the chart of JNCE and how it appeared in our Friday 3/2 Game Plan. It found great support at the very round 20 number on 3/1-2 and has since sprouted well more than 30% this month and as most leading stocks do, they give you an opportunity to add to, or for those who missed the initial move a chance to start a position. To be completely frank I was not expecting this name to approach its add on cup with handle trigger of 26.65 in such a rapid fashion but give the name the respect it has earned. There is yet another entry point and that would be through a cup base trigger of 29.39 which would record an all time high.

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ChartSmarter Monday Game Plan 3/12/18

Markets screamed higher Friday to end a powerful week after a well received jobs report. One has to come away impressed as often the initial reaction off a big jobs report is faded but today momentum kept proceeding. The leading Nasdaq led with a gain of 1.8%, its third straight Friday gain of more than 1%, as 2/23 and 3/2 added 1.8 and 1.1% respectively. It is now on a six session winning streak, and all 6 days CLOSED at the top of the daily range and Friday hit all time highs. The Russell 2000 acted fine and rose by 4.2% on a weekly basis, equal to that of the Nasdaq, and now has the look of a deep cup base with a potential breakout trigger of 1615. We will continue to keep a close eye on the VIX as it CLOSED below its 50 day SMA for the first time in nearly 2 months. To be fair the last 2 sessions did finish well off the intraday lows, and recorded bullish hammer candles. The bears are clinging onto this fact and it is shaping the look of a bullish falling wedge. Remember it is not necessarily a crime to CLOSE below your 50 day SMA, especially if it is upward sloping, but it must keep a close distance and try to recoup it in a rapid fashion. Next week should give some valuable clues to its direction.

Looking at individual sectors to end the strong week it was the financials, industrials, energy and technology the showed the way. The XLF rose 2.4%, the XLI by 2.2%, and the XLE and XLK rose by 1.9%. The XLE has to be respected for the fight it is putting up at its 200 day SMA which is still rising as its 50 day SMA is doing the opposite. Lagging were the defensive group as the utilities and staples were clearly laggard with the XLP up .6% while the XLU added just .3% on such a strong session. On a weekly basis it was almost exactly the same with the financials and industrials both posting a 4.4% jump and technology rounded out the top 3 with the XLK up 4.2%, all very respectable gains. The staples and utilities lagged on the weekly returns added 1.6 and .9%. The real separation is seen on the YTD basis as the XLK is up better than 10%, cyclicals by 7.6 and financials by 6.4% and showing big relative weakness is consumer staples, energy and the utilities LOWER by 4, 5.3 and 6.2%. The obvious lesson, know your sector.

At ChartSmarter I am always looking to uncover hidden gems. It is not easy and quite frankly there just are not any to report, but with hard work they can often be uncovered. Many times they will come in the form of new issues or spin offs, and some come back from the dead. It is rare but PRICE action will put you on the right path. Below is the chart of QNST and how it appeared in our Thursday 3/8 Game Plan. The marketing name popped up on my radar after clearing the very round 10 figure last November-December, but no WEEKLY CLOSES above. It finally did so the week ending 2/2, which soared by more than 28% in the heaviest weekly volume in the last 5 years. After such a huge run, one who missed the initial move would want the name to trade sideways. That is exactly what this stock did creating a bull flag that which was taken out today rising more than 6% in active trade. Look for a move toward 17 in the near term.

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Past and Present View on ZG

Technology continues to be a bright spot so far in 2018 with the XLK up 8.2% and we know the Nasdaq is dominating the major benchmarks thus far as well. We have been advocating buys in the strong semiconductor and software groups, but the internet sector is not to be ignored by any means. Of course we have TWTR up 45% YTD, AKAM had a strong pop Thursday, GDDY has a beautiful chart and below we look at Zillow at a couple different times this year. The chart directly below is how it appeared in our Thursday 1/25 Game Plan and then the second chart takes a present look.

Stocks that can be bought after recent bullish ascending triangle breakouts are ZGZG is an internet play higher by 8% YTD and 16% over the last one year period. Earnings have been mixed with gains of 2.3 and 10.3% on 11/8 and 5/5 and losses of 9.1 and 7.6% on 8/9 and 2/8 (REPORTS 2/6 after the close). The stock is higher 4 of the last 6 weeks and by 3.4% this week so far. It recorded a nice break above bullish ascending triangle trigger of 43 on 1/11, and respect the gap fill on 1/19 from the 1/10 session which also bounced off 200 day SMA. Enter ZG at 43.25 and triangle has measured move to 48. On weekly chart one can add to above 50.91 cup base trigger than began week ending 6/30/17 (notice double top their with week ending 8/1/14 having an intraweek high of 51.42).

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ChartSmarter Friday Game Plan 3/9/18

Markets put in a decent showing for themselves today as the averages CLOSED near highs for the session, albeit with modest gains. The Nasdaq and S&P 500 added .4%, with the S&P 500 hitting a roadblock at its still rising 50 day SMA recording a bullish hammer candle, and the Russell 2000 took the day off falling .2%, but for a fifth consecutive day finished in the upper half of its daily range. For the week headed into Friday the Nasdaq is showing a nice gain of 2.2% and looking for its third weekly gain in the last four beginning with the powerful 5.3% advance the week ending 2/16. The tech heavy index is now about 1% from recent all time highs made in late January near the round 7500 number. The S&P 500 is higher by 1.6% so far and the Dow has added 1.3% so far this week.

Looking at individual it was a risk off flavor with the utilities, staples and healthcare at the top of the leaderboard. Not the type of participation bulls wanted to see. Industrials and technology rounded out the top 5 and energy and materials lagged. It was a quiet session as none of the major S&P sectors rose by more than 1%, and nearly all ended in the green. Within the cyclicals it was the gaming related plays that shined as WYNN rose more than 6%. Its chart reveals a few things with a reversal at the very round 200 number in late January and a bear trap as the 3/2 session recorded a bullish hammer which set off the current 4 day winning streak. The trap was because intraday it was beneath a bearish head and shoulders neckline pivot of 160 that had a 40 point measured move lower and another great example of why we demand CLOSING prices. There is a bit of headline risk in the name with Steve Wynn in the news and I have no real opinion on the play just an illustration of why CLOSING prices should be respected. Retailers continue to be a concern with the XRT slipping 1.7% Thursday and has been below its 50 day SMA for one month now.

The packaging plays offer valid clues as to the genuine health of the economy, for obvious reasons. If goods are not being packaged they are not being produced. We highlighted FBR, a Brazilian paper name recently , and today we look at a metal packager. Below is the chart of BLL and how it appeared in our Wednesday 2/28 Game Plan. Notice how it did several things right with a successful gap fill in the middle of February, and a bullish piercing line on 2/6. There however has been a tug Of war at the upward sloping 200 day SMA between bulls and bears as if time it approached the long term secular line it was rejected in December, January and February. That has changed now with a current four session winning streak as the last 3 days have CLOSED above the line. One now looks to see how it reacts when and IF it nears the add on cup base pivot point of 43.34.

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