Chart of the Day: A CIBR Glitch

The First Trust Nasdaq Cybersecurity exchange-traded fund CIBR showed strength in the first half of the December, after a solid November. But then, by mid-December, CIBR started to correct.  

For a time, the CIBR was making higher-highs and higher-lows, our textbook definition of an uptrend. Mind you, when a stock or ETF gets overbought it does not necessarily mean it is ready to come down.  We need to wait for signals and confirmation first before we have the confidence to believe a correction is at hand.

Cyber attacks continue to be a problem as the crooks are one step ahead. This means spending by companies is mandatory, and as the attacks rise, the growth in spending will rise exponentially as companies seek protection and solutions.

Notice the nice, steady uptrend in the channel drawn from the start of October. It's a very smooth but sometimes erratic channel of higher-highs and higher-lows that did not crack support. But the recent move down in January did penetrate the lower end of the channel and now that is resistance. But the good news here is indicators are pretty much washed out and are looking to turn up.

If we look at the second pane on the chart above, we see the Moving Average Convergence Divergence indicator is curling higher, way too early to call a buy signal though. Down at the second-to-bottom pain, we also see the stochastics (momentum) is turning as well. 

But the average directional index, or ADX, in the third pane is pointing down, which means price is not bullish. The trend is down, even as the ETF has bounced over the last few days. This could be the start of a long digestion period, a sideways consolidation for a period of weeks where the CIBR just goes nowhere.  That might be the set up for the next move, which we believe is much higher.

The Pro Portfolio is long CIBR.