“V” is for vendetta, right? But it’s also a technical analysis staple. The V is one of the most basic patterns and predictable at the same time. In a nutshell, a V pattern looks just like the letter, stocks fall/rise essentially without a pause, reverse, and head the other way in a symmetrical way.
You can see an example of the V on this NASDAQ chart.
As you can see on the chart above, there was a little congestion on the way down between 15,200 and 15,000 and some traffic in the same neighborhood on the way up. Once bulls push their way out of the blue box, the NASDAQ should complete the right side of the V and test its 52-week high of 15,403.44.
Where prices go after the V is complete will likely dictate Wall Street’s next move. A breakout would likely lead to an aggressive push higher. Whereas a breakdown might be seen as a buy the dip opportunity.
Upward momentum is definitely positive; although, there might not be a lot of upside beyond the V in the short-run. We would not be surprised to the see the NASDAQ to make it back to its 52-week high and run into profit taking before the next leg up.
Earnings could be the catalyst to the NASDAQ finishing off the V and starting a new path higher. So far, 116 S&P 500 companies have reported earnings with 98 exceeding profit estimates and 87 topping revenue forecasts. That’s a healthy bullish surprise rate above 84%. The phenomenon known as post-earnings drift – companies that beat earnings tend to outperform for up to the next 90 days – could mean the financial markets continue to do well.
Almost a repeat of last week with technology exchange-traded funds (ETFs) absolutely dominating our sector performance leaderboard. Tech held eight of the top 10 positions with Clean Energy and Consumer Discretionary claiming the other two. These are the types on industries Wall Street bets on during economic expansion or strong economy.
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN) might be the odd one in the list as one of the two non-tech funds, but it is our favorite chart. QCLN got to the better side of some resistance and could make a run at its 52-week high of $90 on the dot.
NIO Inc. (NIO) is our favorite chart of First Trust NASDAQ Clean Edge Green Energy Index Fund’s (QCLN) top holdings. NIO Inc. designs, develops, manufactures, and sells smart electric vehicles in China and its stock price recently broke a downtrend. If bulls can take out the 200-day of $43.10, then it could eventually find its way back to its 52-week high of $57.75. On the downside, a close below $33 would be as low as we’d probably go.