Climbing The Wall Of Worry:
As negative headlines continue to command, the indexes have for the most part yawned. One should admire their resilience in the face of that. The chart of the Nasdaq shows a couple good traits with a successful gap fill this week from the 9/4 session, and its stubbornness to hold the very round 8000 figure. The semis which have assumed near leadership role over software is resuming that relationship with the SMH, up 1.5% this week headed into Friday while the IGV is lower by .9%. The SMH bounced energetically off its rising 50 day SMA Wednesday, and followed through with a hammer candle Thursday. Keep in mind the SMH is doing this while the Nasdaq is DOWN 1% for the week so far.
Candles Help Plenty But They Are Not A Panacea:
I am a big fan of round number theory and candles, but with everything else they come secondary to PRICE. The security software names have been hit very hard, and I have mentioned catching a falling knife is best left to others, but if one wants to speculate at least wait for a bullish bottoming candle to enter. Below is the chart of CRWD, and how that did NOT work. One can see the consecutive doji candles that were recorded on 9/11-12, and that it did not prevent the stock from falling further (doji candles are often adept in signaling a change in the prevailing trend). The name has been nearly chopped in half from just 5 weeks ago, and there are much better fish to fry.
There is an old quote, that states something like if the train that left the station comes back to you, there is something wrong with the train. In my estimation it is referring to classic bull market behavior, and a strong stock or index not letting you in by pulling back. An example of that may be with the chart below of SNAP, and how it appeared in our 9/20 Technology Note. It has been in the shadows on FB, but YTD is higher by 208% while Facebook has gained 37%. It failed to break above a cup base pivot of 18.36 on 9/24, a good illustration of waiting for PRICE confirmation. This may be an exception to the train rule as Wednesday recorded a bullish hammer and touching the 16.50 suggested entry. Above 16 remain constructively bullish on the name.