We are getting the action we want from the NASDAQ, stepping up stairs with a series of higher lows followed by higher highs; wash – rinse -repeat. Jagged moves up, as you’ll see on the chart below, confirms the recent trend higher most likely has more room to ramp up.
At the very minimum, the pivot higher provides clarity on an exit point should Monday’s rally prove to be a head fake. Last Friday’s low of 11,630.54 becomes the technical, don’t close below this line of support. As long as the NASDAQ remains to the plus side of the pivot point, there is a strong likelihood the rally lives. A close below 11,600 and bears could be given new life. Sort of like an errant pass, bailed out by a shaky holding call on third down will billions watching.
So, now we know what to look for on the downside. The watchpoint for the upside is just as clear at 12,200, the closing price for the NASDAQ on February 2, 2023. The battle lines are drawn. A close above 12,200 and the index could run as much as another 1000 points before this up cycle is complete. If support fails to hold, the NASDAQ might catch support quickly at its 200-day moving average of 11,434 and again at its 50-day mark of 11,004.
As of this keystroke, with potential confirmation of a continued uptrend, combined with a favorable technical reward-to-risk ratio, we remain bullish until the NASDAQ breaches and closes below 11,600.
Index investors might consider adding Invesco QQQ Trust (QQQ) and cut losses if the index slips below our technical, don’t close below this line. You might also consider adding more with a close above 12,200.
Oil, Gas, and Energy owned the top three spots on the sector/industry watch scoreboard. It’s not surprising considering Wall Street took some profits on more growth-oriented stocks last week. However, a couple of tech exchange-traded funds were next in line, managing to stay in the green while many similar sector/industry ETFs finished the week underwater.
Of the oil & gas, SPDR S&P Oil & Gas Equipment & Services ETF (XES) would probably be our first choice.
However, we lean more towards growth/tech when the indexes are on the rise. First Trust NASDAQ Cybersecurity ETF (CIBR) was the number four performer last week and has plenty of headroom on its chart if the ETF can get past $42.50. It won’t be too difficult of a task if we’ve made the correct call on a continued move higher for the markets. We’d consider cutting losses of/when CIBR finishes the trading day below $40.50.
CIBR’s number four holding, Cisco Systems, Inc. (CSCO) might be our top choice. According to our chart price analysis, the networking giant could offer an attractive reward-to-risk ratio. CSCO has been range bound between $46 and $50 since the middle of November. A close below $46, and we’d cut bait. As we type, Cisco trades at $47.86. A close above $50 and the stock could be in for a nice move higher, especially once it moves beyond $55.