Chartsmarter Insights

Industrial Reprieve: The industrial space last week put up a lackluster performance falling 2.8%. It bested just healthcare and the materials. If one was to peek at the WEEKLY chart this shallow pullback could be a good opportunity. Over the last 4 months, it declined just 2 other times, falling 4.2 and 2.8% in the weeks ending 9/6 and 8/2. Both of those CLOSED at the lows for the WEEKLY range like last week, although this most recent one did complete a bearish evening star pattern, but the fund continued its ascent upward the very next week. Earnings came in which was the main cause of the potential technical damage and the largest holding in GE slumped 9% on Tuesday. It is being comforted at the moment by the 50-day SMA, but it looks vulnerable and is now below the bull flag breakout. Others that disappointed, all on Thursday, included HON which slipped 5%, TXT by 6%, and CARR by 9%. Each of these names looks like it will need time to repair and perhaps that will weigh on the space. The best-case scenario for bulls is for the XLI to trade sideways and not continue its descent lower on the daily chart below after falling every day last week.

"FACE"ing the Music:  Next week the Mag7 will all be REPORTING earnings and each day we will take a look at one in our opening paragraph. META's announcement will come on 10/30 before the open and I still look at the company as Facebook. The daily chart below is a solid one as it drifts a bit lower, now 6% off its most recent 52-week highs after a blockade at the very round 600 number (it has been trading between the very round 500-600 numbers since the bullish hammer candle on 9/11). There are some technical difficulties it has to address with the WEEKLY chart showing last week completing a bearish evening star with an extremely taut range the week ending 10/11. The MONTHLY chart has recorded a very robust run from the very round 100 number to the 600 figure, a gain of 500% in just 2 years. Give this chart extra credit however for ignoring the back-to-back doji candles, in September-October 2023, and again this August. These candles often are adept at signaling potential trend changes from the prevailing direction. 

Not Much Soft About It:  Sure the IGV is now trading 3% off its most recent 52-week highs this month, and it is important to remember that nothing goes up in a straight line. Below is the daily chart of the ETF and it broke above the very round 90 number on 10/8 and the vast majority of instruments that trade through 90 often go on to reach par and beyond. One has to be open-minded to a bigger drawdown, as we spoke about in our 10/21 Technology Note, but so far the fund is acting just how you would like to see if you are bullish on the space. In my opinion, it makes sense to see what names are weathering this nascent storm the best. There is a very good chance they will be the strongest out of the gate, once the uptrend resumes. Stocks that should be included in the conversation include APP, and any move back toward the lower 150s to retest the bull flag breakout, which carries a measured move to 175, should be bought. Notice almost 2 months of trading near a white-hot 80 RSI level. MSTR is another and any push toward the very round 200 number, the level of a WEEKLY cup base breakout, should be purchased.

Leadership Qualities:  Not many names have kept pace with NVDA in the semiconductor space during the last 6 months but the chart here shows that Broadcom (in pink) has certainly done so. The daily chart below does display some wide and loose overall trade, which tends to be bearish, but PRICE action is not disappointing. It is right at a cup with handle breakout from two weeks ago, and we know the best breakouts tend to work right away, but this is holding firm in the area, and look for this to make a push toward the 200 level into year-end. While the SOXX is 15% off its most recent 52-week highs, AVGO is only 4% off its own annual peak and its MONTHLY chart is a picture of health, even as it trades at a white-hot 90 RSI. Notice though it has been at this altitude several times over the last decade and it did not deter sturdy PRICE action for long. It is a model of consistency, declining just 3 months in the last 2 years, not a typo, and the accumulation (strong volume) has been exceptional over the timeframe. This is a hedge fund hotel that one should feel very comfortable residing in.