Tales of a Technician: Tech is Bullish Once More! | Tackle Trading

Monday provides a perfect case study for how trends change. In case it wasn’t obvious, the downtrend in the Nasdaq is officially over. If you’re using the daily trend as your guide, and you haven’t shifted to a more bullish posture, then I haven’t a clue why.

Let’s chronicle this turnabout from downtrend to uptrend one step at a time.

- Step One: The downtrend showed slowing momentum by building a double bottom pattern last week.

- Step Two: The rally off the lows pushed prices back to resistance on Friday. At a minimum this would have resulted in an equal pivot high, signaling a neutralizing of the downtrend.

- Step Three: Volume swelled during the bounce off the bottom, signaling institutions were wading back in.

- Step Four: Prices cleared horizontal resistance ($273) today, guaranteeing we’re going to see a higher pivot high.

- Step Five: Volume was above average today in a continuation of last week’s accumulation.

- Step Six: Since the 50-day was also positioned at $273 resistance, we’ve broken above it too.

Does this mean the Nasdaq is destined to make new highs? I would assume so. But remember, we’re not in the business of predicting the duration and magnitude of the trend. Instead, our job is to simply be on the right side of it. And after today, I can confidently say that trend is pointing up, not down. The tech-laden train is heading northbound, not southbound.

Until we get a break of support and re-entrance to a downtrend, I’m riding with the bulls.

What of Other Indexes?

This is where things turn murky. While the Nasdaq has succeeded in turning its daily trend higher and reclaiming the high ground above its 50-day moving average, the S&P 500 has only partially reversed. After forming a lower low on slowing momentum, SPY succeeded in breaching a prior pivot high on Monday. However, it stopped short of taking out the 50-day moving average so there’s still some work to be done.

Nonetheless, I’m still assuming the break is imminent.

Finally, we have the Russell 2000 Index. If you want to stubbornly defend your bearish bias, then this is the Index to cling to. Despite Monday’s 2.5% pop, its daily downtrend is still intact.

Unfortunately, if you wait for everything to return to uptrending status before changing your bearish bias, then you’ll likely have to lock-in bigger losses down the road.

For my part, I prefer to shift quicker. Monday’s evidence was sufficient to justify closing some bear trades while adding bulls in my opinion.

Ok, bulls. You’ve got your foothold. Now push it. Push it real good.

Legal Disclaimer

Tackle Trading LLC (“Tackle Trading”) is providing this website and any related materials, including newsletters, blog posts, videos, social media postings and any other communications (collectively, the “Materials”) on an “as-is” basis. This means that although Tackle Trading strives to make the information accurate, thorough and current, neither Tackle Trading nor the author(s) of the Materials or the moderators guarantee or warrant the Materials or accept liability for any damage, loss or expense arising from the use of the Materials, whether based in tort, contract, or otherwise. Tackle Trading is providing the Materials for educational purposes only. We are not providing legal, accounting, or financial advisory services, and this is not a solicitation or recommendation to buy or sell any stocks, options, or other financial instruments or investments. Examples that address specific assets, stocks, options or other financial instrument transactions are for illustrative purposes only and are not intended to represent specific trades or transactions that we have conducted. In fact, for the purpose of illustration, we may use examples that are different from or contrary to transactions we have conducted or positions we hold. Furthermore, this website and any information or training herein are not intended as a solicitation for any future relationship, business or otherwise, between the users and the moderators. No express or implied warranties are being made with respect to these services and products. By using the Materials, each user agrees to indemnify and hold Tackle Trading harmless from all losses, expenses and costs, including reasonable attorneys’ fees, arising out of or resulting from user’s use of the Materials. In no event shall Tackle Trading or the author(s) or moderators be liable for any direct, special, consequential or incidental damages arising out of or related to the Materials. If this limitation on damages is not enforceable in some states, the total amount of Tackle Trading’s liability to the user or others shall not exceed the amount paid by the user for such Materials.

All investing and trading in the securities market involves a high degree of risk. Any decisions to place trades in the financial markets, including trading in stocks, options or other financial instruments, is a personal decision that should only be made after conducting thorough independent research, including a personal risk and financial assessment, and prior consultation with the user’s investment, legal, tax and accounting advisers, to determine whether such trading or investment is appropriate for that user.

Originally published at https://tackletrading.com on September 29, 2020.