Category Archives: charts

Q scan

charts, IBD, strategy


#IBDPartner

Since the last time we posted the market has taken off from The Last stand 200sma weekly up over 10% on SPY and now close to major resistance. The picture says it all: 200sma touch holds perfectly and now has rallied all the way to 260 target that we talked about back in December. From 260-280 major congestion.

We have a few scenarios in mind:

Ideal one: pulls back somewhat near SPY 260 resistance to scare the bulls, invigorate the bears, and then rises back up to attack resistance without being overbought.

Bearish one: back to lows

Most frustrating one: goes thru resistance without creating any bases as the stretched elastic just keeps getting more stretched. Just like how support was meaningless on the way down (except for the final one which thankfully stood fast, the 200sma weekly) resistance has been also meaningless as market has climbed up 10%. However we are hitting 260 in overbought status so we do expect at least some chop and not a smooth uptrend like we have seen last 4 sessions.


If market does now do some horizontal work it would create a plethora of set-ups from our Go-To  favorite scan on MarketSmith we call our Q scan

All the charts below need to now form bases/handles but have great potential and are acting like leaders. CHGG we already posted on Sunday and is up 8% from that tweet. Now at highs if it can get a handle (pullback to 30-31) it would be one of the sweetest setups in the market.

We’ve talked about NOW numerous times in last few months — one of the best stocks in one of our favorite sectors, Enterprise Software, and to boot IBD #6. Ideally we would like a base right here in the low 190s before breaking out.

Our newsletter subscription runs thru PayPal and we know first hand how well the company is running right now — stock looks fantastic, and IBD #28. Same theme — we would like the stock to base out right here near 90 to set up. It’s already at upper BB and too stretched to buy right here.

TEAM another one we have talked about many times — also Software sector and IBD #4. We had a breakout alert at 84 on the stock a few weeks ago in our newsletter and it’s now setting up again near highs. Just like CHGG this one needs a handle.

VEEV is IBD #2 and has had a big V type move from 50sma weekly — we’d love a base here under 100. Similar theme in all these stocks: big runs, leaders, now need to chill and set-up.

Keep the above on your radars– if we can get this market to at least churn around here we should be able to get solid risk/reward entries that don’t require chasing. See you on the streams. HCPG

Now what?

charts, general, IBD, strategy

We talked about the 200sma Weekly on the SPY as the last stand last weekend. Guess what? It held, perfectly. Now what? Well in every successful previous test in the last 14 years it held as a zone meaning that it was tested several times. However as we explained last week when successful, there were no continuation down candles on weekly meaning there was no follow through down on two consecutive candle on 200sma break. Maybe this time is different and we have a perfect algo-bottom on SPY 234? Or maybe not. We have 2/3 basket swing long SPY QQQ IWM and we will trail stop up and stay defensive.

As our readers know we are big fans of “tells”. In this business tells change constantly and quickly and you have to constantly look for new edges/hints; strategies based on patterns that give you a slight edge. Software stocks have acted as one of our tells now for the last few weeks — when market is weak but they are strong it gives us more confidence to go counter trend. And when they are weak but market is trying to rally we become more skeptical of the move and more apt to short the resistance than buy strength.

We’ll see how long they act as leaders but for now they are so keep them on your watch-list. If you are MarketSmith subscribers look through these three software groups: G3220 (up 22% YTD), G3582 (up also 22% YTD) and G3583 (up 19%).

Good example of this group acting like leaders is the pattern on TEAM — just incredible relative strength in current tape.

For those new traders who got hurt these last few months — learn from it. We got hit hard as rookies in the 2000-2002 bear market crash but did not get hurt in 2008-2009 and as stressful as this last rout has been, it has not hurt us either. Grab a binder, write down notes, print out charts, and constantly be reflexive. Getting hammered in your first bear market is acceptable. Next one is not.

See you on the streams. HCPG

The last stand

charts, strategy

Below is the weekly 200sma, the last stand of any major SMA support.   As you can see it’s been key now for the last 14 yrs.  In the last bear market (financial crisis) we stayed below for 2 years 2008-2010.    Last time we tested the actual line was in 2011 when price stayed on it for weeks before finally climbing back over until hitting it again today, seven years later.   Do note that as much as we  would like a magical bounce on it this week from past observations when price has used it as support (2004, beginning of 2005, 2011) it’s been somewhat messy affair that lasted weeks with a few weeks dipping just under.

Here is a close up of the last time the 200sma weekly hit in 2011 where we spent 9 weeks basing on it.  Two things to note:  1) there were three weeks it closed under, 2) but there were no continuation candles down.   Price refused to budge down for continuation follow through below the 200sma and finally bulls won and took it higher.

The best case scenario is that what happened in 2011 also happens in 2018-2019 where we bounce/hold on this level and climb back up.  Worst case scenario of course is another recession and prolonged bear market that lasts for example 2019-2021.    We expect at least some attempt at holding this zone, give or take 3-4% similar to 2011,  especially since we are so stretched to the downside when we hit it today after 8 sessions under the 9/20EMA on 60min time-frame.      Whether that holds or not though after any initial bounce is another story.   One step at a time.   For now enjoy the day off tomorrow and focus on the holidays, friends and family. We’ll see you Wednesday on the streams. HCPG

Low visibility but have a few plans

charts, IBD, strategy

#IBDPartner

All bear markets we’ve experienced have had wicked rallies and it’s good to always have a plan in both directions in bear markets.

XLF 23 next target here — this one is a big one and we imagine at least there should be some type of hold/bounce there, dead cat or not.

QQQ 156 weekly lost today but market has until Friday close to get over.  Overshoot territory and then rally back to 156 definitely one potential plan.


SPY look how that descending 20EMA/60min served as a wall all the way today — lost short-term support but held the round 250 spot.

We went through our MarketSmith scans of the entire IBD 50 this evening and wow what technical damage across the board.  It’s going to be a long time before bulls can get any type of healing/constructive patterns on daily/weekly.   Even if we do bounce, dead cat bounces are usually V type bounces that still don’t set up conventional swing type entries.

Once market does stabilize, whenever that may be, we will look at the software names to take leadership and will likely see them populate the Near Pivot screens.

As for shorts– we never like shorting into the hole.  Sure if it’s Indy down intraday follow the trend down for a trade but for swing shorts probably wiser to look at resistance spots to short above than pressing down here with SPY QQQ IWM all under Bollinger Bands.

So what’s our favorite plan?  Get some panic and hit XLF 23 for a quick squeeze up past QQQ 156 by Friday close.   Very specific but hey just one potential plan.    Stay safe, and if you need to hear it just one more time, here it is: cash is a position.   See you on the streams.  HCPG


Santa rally?

charts, IBD, strategy

Last night we responded to a question about the possibility of a headfake down thru 2600 on the E-mini:

We didn’t actually think it would happen– but it did, sort of, depending on your time-frame, with a break of 2600 and then 40 point rally up. 

We were focusing on SPY 260 so let’s stick with that for now:   when the 260 level broke we actually were still pretty bearish. Why? Because it was very orderly and financials were acting like death.  Our feeling was that we would go lower, led down by the banks.     We thought SPY 260 is nothing, let’s get QQQ to 156 and then think about a bounce.

Then one thing happened that changed our opinion and our positioning — and if you go through our tweets from 11:30 on you will see a complete turn around in terms of our focus.  The old school tech started firming up and taking leadership.  As we tweeted about it a half dozen times: for a while there it was financial anchor on tape pulling down, and tech trying to rally the market.  

Tech won the day and SPY closed green.   Our map for last little while has been the 9/20EMA on the 60min — if you recall we got long a basket on XLF 25 hold last Thursday which worked great until Friday morning when SPY hit 270 and the descending 20EMA on 60min and reversed hard.  

Note the rally last Thursday until 270/descending 20EMA which immediately reversed the tape.     Today’s rally is the second test on this EMA and the EMA is flatter so it has a better chance of breaking.  

We got our 263 and 265 short term targets met on SPY but still like the position long to see if we can get it over that 20EMA/60min.  If 260 goes all bets are off.    Same story for tomorrow– watch the financials vs tech contest.  If financials can firm up we could be in for a decent multi day rally. Big if, but that’s what you have to watch.

As for individual stock longs we have two one sector we like a lot and which we have blogged about, Enterprise Software and one stock, TSLA.

From the IBD50/MarketSmith scans you can see NOW PAYC ADBE TEAM ALRM VMW all in the IBD50.  Sector is holding up great but it needs a more stable tape — and once it gets that it could really rip.  Have these stocks front and center.   We consider these, for now, the new leaders of tech.   (#IBDPartner)


Take a look at NOW for example, IBD #8, and just set to go — just needs a less hysterical market.


And talking about old leaders — we just missed the AAPL buy (saw it a minute too late) today but do like this risk/reward potential:

So to conclude — we would feel better about the market if XLF can get over that 20EMA/60min resistance, and all bets are off if SPY loses 260 (1.5% away so decent risk/reward against that stop).

See you on the streams.