Chartsmarter Insights

Crude Awakening:  Oil enjoyed a nice start to the week Monday surging more than 3% on OPEC news and an escalation of the Russia-Ukraine conflict. The WEEKLY chart below of WTI shows the commodity has been producing some bullish candlesticks as of late (notice the rare doji candle in September 2023, just the third since the start of 2023, which called the top just above the very round 90 number). Another thing to like is the bullish divergence with the black ADX signal line which is rising powerfully since March as PRICE has fallen/consolidated. Additionally, the distance between the green and red lines is its widest in 2.5 years, and these are likely to start converging shortly. I feel that the recent lows in the upper 50s are a good area to play against and this could go on to retest the break below the bearish descending triangle trigger of 67.50 where it should encounter some fierce resistance. This big move Monday could be nothing more than the start of a dead cat bounce or something more positive. I think many are positioned bearishly and the surprise could be to the upside.

Biotech Bounce?   This possibility has been discussed ad nauseam and that could be one of the reasons that this time may prevail. No one really left with belief, and this can catch market participants by surprise. Of course, hope is not a strategy, so we need to rely on PRICE and technicals. Below is the daily chart of the XBI and it is putting up a fight, but has done this plenty of times before only to falter. I like the way it is fighting here, but it has to clear the downward-sloping 50-day SMA decisively for me to think this time is for real. On its MONTHLY chart here notice how this has bounced forcefully at the round 70 number as it did in April, and the last 3 times swimming in that area PRICE moved upward to 175, 95, and 103. Could a similar run be in the cards? Top ten holdings in the XBI that could help are GILD which is quickly building the right side of a cup base after filling in a gap from the 2/11 session on 4/25. A bearish evening star was completed on 4/11 and look for the heights to be achieved before Q2 comes to an end. INCY has carved out a bull flag and a break above carries a measured move to 74, but these formations below the 200-day SMA tend to be failure-prone. Perhaps waiting for a CLOSE or two above the secular line makes sense.

HACK Attack: There has been a bifurcation in action among the cybersecurity stocks after REPORTING earnings this quarter. Many have disappointed, or at least recorded weak reactions, including one of my favorites in FTNT. On 5/8 the leader gapped down to the tune of 8% and since it has been having issues with the upside gap fill from 5/7 session. On the positive side it has formed a bull flag and a break above 106 could carry a measured move to 119. OKTA was shelled Wednesday by 16% after an ill received number, but should settle in here as it has filled in a gap from 4/28. PANW dropped 7% on 5/21 and there is nothing to do here until it can CLOSE above a double bottom with handle trigger of 195.52. Best in breed CRWD, all four of these names are all top 10 components, REPORTS next Tuesday after the CLOSE and its last 2 reactions fell by 6 and 5% respectively. This has broken above the 450 bull flag trigger would could see a measured move to 540. Interesting that two top ten holdings in the ETF are actual defense names, many think pure play software, and the MONTHLY chart on NOC is carving out a cup base pivot of 534.16 in a base dating back to Q4 '22. Respect the comfort being given at the 50 MONTH SMA here which also occurred in 2019-2021. GD needs a CLOSE above 283 on the WEEKLY to start rounding out the right side of a potential cup base. 

"Juicing" Up the Fund: Looking at the top holdings in the XLI the selection committee certainly became very creative adding UBER to the fund back in 2019. It is the second-largest holding in the ETF at more than 4% and its recent run has helped the benchmark handsomely. The stock is up 48% YTD and the MONTHLY chart below shows it looking for a cup base breakout in May if it can finish above 82.24 this Friday. The potential breakout to 110 which quite frankly the way it is going could happen in late 2025. Its daily chart is well extended above the double bottom trigger of 77.68 and Monday ended a 4-session losing streak, its first since the last 4 days of 2024. The streak began with a bearish counterattack candle on 5/20 just above the very round 90 number, but remember the vast majority of stocks that trade through the very round 90 number often go on to trade to par and beyond. The XLI has a solid 1-2 punch with top component GE at 5% and I am still in awe of its MONTHLY chart which has nearly met its measured move to 257 from its cup base breakout above a 142.11 pivot in a pattern 8 years in duration. Since October 2022 it has declined just 7 months and back-to-back times just once.