The Nasdaq followed through on its doji candle Thursday to the downside Friday falling 1.5%, its worst loss in July and its only 1% plus decline this month with one day left. Its daily range was more than 150 handles and three of the last 4 sessions CLOSED near the lows for the day. It is now 1% above its upward sloping 50 day SMA, a line it has been above for 3 months, and a move below could preempt a move toward the 200 day which it last came close to touching in February and April. We all know of the FB, INTC and TWTR hits this week, but other big Nasdaq names that recorded poor weekly candles were BIIB and PYPL.
Their was big bifurcation this week as the Dow and S&P gained 1.6 and .6%, while the usually forward looking Nasdaq and Russell 2000 FELL 1.1 and 2%. With all the bearish headlines you will read this weekend, remember they generate more attention than bullish ones, the S&P 500 is on a 4 week winning streak. Volume has increased with each successive week, but this one did record a shooting star as it neared the right side of its cup base that began in late January. The last 2 days action could end up being a handle on that cup and give it credit as it trades above the important 2800 number.
The biotech space is one that investors should be eyeing this summer. Looking at the XBI I figured it would be a rough week with BIIB’s 50 handle reversal, but it is just the 10th largest holding in the ETF (no name has a greater than 1.62% weighting which is a positive). Delving into the PRICE action, which supersedes everything, it was not surprising to see the 5.2% drop as it was unable to break ABOVE a 3 week tight pattern, as the weeks ending all CLOSED within just .43 of each other. This occurred at the very round par number too, and a move toward the round 90 figure would offer a good entry in my opinion. That doubles at the moment with its rising 200 day SMA.
Lets start with the bad here because it was rotten, as technology lagged Friday with the XLK slumping 1.7%. More importantly on a weekly basis it recorded a bearish shooting star candle falling 1%, after the prior week registered a doji candle. It is now below a 72.53 cup base trigger and we know the best breakouts work right away, so to see this action so promptly is certainly a worry. Volume trends are concerning, as there has still yet to have been a week of accumulation in 2018. Sure one can blame the summer months recently, but the overall debate on trade is getting a bit long in the tooth.
As poorly as the week felt 7 of the 9 major S&P sectors rose on a weekly basis (discretionary and technology fell .5 and 1%), three groups rose more than 2%. The industrials and financials gained 2.1% via the XLI and XLF, but energy led as the XLE added 2.3%. My bearish thought may need to be amended as more positive as it has now touched the 78-79 level FOUR times since December ’16. An old salty trader friend of mine used to love to say their is now such thing as a quadruple top, but I still need to see PRICE move through the level. Above 80 could be a huge breakout, but of course we are still a few percent away but we are very patient investors.
One can make the argument that the semiconductors have been missing in action through the overall tech rally. The SMH is lower by 7% off most recent 52 week highs as the Nasdaq is just 2% off its own. Of course many in the space are much lower than that as INTC is now 17% off its own highs and former best of breed AVGO is deep into bear market mode 23% off its recent highs. Below is the chart of another former leader AMD and how it was presented in our Monday 7/9 Game Plan. It recorded a very strong 10 week winning streak which began at the very round 10 number in late April and the very tight trade has to be admired. That is until the last 2 days of the week as Thursday-Friday rose by a combined 17.6%. Not surprisingly, this name was stopped just shy of the very round 20 number Friday, and look for some consolidation in the coming weeks there before another potential move higher. Dips are to be bought in this name going forward.