Here's Why Monday's Rally Felt Different
Let's deconstruct the market's rise and the noticeable reason it differs from two other recent rallies. Plus, the pattern to watch now, three key follow-ups, Tesla, Disney, Nike and more!
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
The Market
Now that we finally got a rally (mostly in what was down, not what has held up) everyone wants to know how long it will last and what price it will stop.
I have stated before that we need to monitor sentiment. From an anecdotal standpoint, questions like those are bullish for stocks because it means folks are looking over their shoulder. However, when it comes to the options markets, they were quick to buy calls today as the put/call ratio was 0.78.
In terms of levels, I’m not a big fan of saying "okay, this is the price (on the indexes)" as I would rather use the indicators. I can tell you in terms of being overbought, we’ll have a small overbought condition late this week but at this point I think that it remains small. You can see the Overbought/Oversold Oscillator finally scooted higher and is now solidly over the zero line.
I have done some "what-if’s" on the Nasdaq Momentum Indicator and that doesn’t get overbought for about another week or so. I will have to continue to do the math to determine it as we get closer.
Quite frankly very few of the indicators changed Monday. In fact, the rally was much narrower than last Monday’s (March 17) or even Friday, March 14. Just look at the breadth: on the 14th it was +1,900 (with the S&P up 117), on the 17th it was +1,725 (with the S&P up 36). And Monday it was +1,350 with the S&P up 100.
Upside volume on the 14th was 90%, on the 17th it was 87% and Monday it was 77%. What all of this tells me is that Monday they finally ran the index movers, which is why the rally feels so good to the headline writers. And quite frankly I am pleased all these beaten-up stocks like Google GOOGL and Goldman Sachs GS finally joined the upside, but that’s what Monday was: those names got all the love.
Here’s a pattern to watch now: the S&P has been up two straight days. It hasn’t gone three since the first week of February. Can it change? My guess, as I said Sunday, is that if we pull back later in the week it sets us up for another rally in early April. If that happens, I suspect that’s when sentiment really shifts.
It’s still a trading market.
New Ideas
I’m going to do some follow-ups this evening.
Amazon AMZN finally moved. My target is still up in that $215-220 area (black line).
Goldman Sachs GS went right past my $570 resistance but I think it is going to struggle as it nears $600. It’s been a nice 10% ride in two weeks. I wouldn’t mind taking something off the table here.
While I think XLE is getting a bit overbought up here I do like the way Schlumberger SLB keeps trying to base.
Today’s Indicator
The 30-day moving average of the advance/decline line should turn back down late this week.
Q&A/Reader’s Feedback
Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.
Broadcom AVGO should have rallied better than it has after filling that gap below and bouncing off support. For that reason I would like to see this one come down to re-affirm that $180 support area. If it can bounce off that $175-180 area on the next trip down it ought to be good for a trade.
I have lost count of how many stocks have gapped down in the first quarter but add Nike NKE to the list. For the time being unless the stock can gap up over $70 I’m a seller on a rally toward $72 with a longer-term measured target in the $60-ish area (maybe lower).
I have been a fan of XLE for a while and I would add that Chevron CVX is one of the largest stocks in the ETF. That having been said, CVX is over-extended and in desperate need of a pullback. If you are trading it I’d take some profits here. I’d like to see a gradual pullback to the $160-ish area.
Tesla TSLA has some resistance here (and a very short-term target) but the big resistance is at $300-325 so it probably makes its way there over the next few weeks.
Disney DIS would have been better if it had held at $100 on this trip down. Similar to AVGO above it would be better if it can retest $97-98 in the coming days but it will take time to repair this stock. If it holds $97 for a few weeks it ought to improve.
Coinbase COIN is bouncing off support but the question is where can it go on the upside? My inclination is $220 is going to be difficult resistance with an outside shot at $235-240.
