Prudent Pause:
As the Nasdaq starts another week looking for a 7 week winning streak, bulls must be looking for some sideways trade. Five of the last six weeks CLOSED in the upper half of the weekly range, a bullish trait, but a pause would seem responsible. The tech rich benchmark trades well above both its upward sloping 50 and 200 day SMAs, and looks like it could be forming a bull flag formation. Even on the daily chart it is making a habit of CLOSING at the top of its daily range, a good sign as the old saying goes “amateurs open the market and pros CLOSE them”. The Nasdaq is sitting right at overbought status regarding the RSI, but that is a function of a bull market. The best of breed climb to the top. The SMH looks like it is bull flagging, the IGV is stalking its 221 double bottom pivot, and the ETF recorded its first CLOSE above the round 220 number that has been pesky resistance since the beginning of July. Still I for one would like the Nasdaq to digest recent gains, and perhaps let its 50 day SMA catch up to PRICE. We never get what we want with markets, but bulls have to be feeling jolly at the moment.
Somewhat Recent Software New Issue Maturing:
There has been much discussion about how recent IPOs have been scrutinized, and for good reason. Some will certainly come back as the stronger names will come to the fore, and leave their peers who perhaps should have never come to the public markets behind. Below is the chart of MIME, in the software sector which seems to be making a stand once again. It came public 4 years ago, and still sits in bear market mode down 20% from most recent 52 week highs, even after last weeks jump of more than 7%. It broke above a WEEKLY double bottom pivot of 43.68 in an 8 month pattern during a 3 week winning streak between weeks ending 2/1-25 that rose 34%. On its WEEKLY chart it could be setting up another double bottom base with a potential 51.49 trigger. Interestingly it has spent nearly the same amount of time below its 200 day SMA on the WEEKLY chart between last October and this February, and presently. A break above its 200 day SMA could set this name higher in robust fashion.
Recent Examples:
Betting against the semis has been a losing play as of late, unless one was fortunate enough to be involved on the short side of a CREE XLNX or and MXL (all three are down in the 30% off their most recent highs neighborhood). Below is the chart of NXPI and how it appeared in our 11/1 Technology Note. We are looking WRONG on this set up, as we paid more attention to the bearish, rare gravestone doji candle on 10/29. PRICE always is the number one reason for entering or exiting a trade. We did like how it was behaving but thought we could capture a quick play to the downside, instead of being aware of trying to stick to the basic trend higher. It is a good example of riding a trend, whether up or down, as they are more likely to continue than they are to reverse.