The daily bars in Chart 1 show the QQQ breaking last week's short-term support and falling further below its 50-day moving average today. The two upper boxes in Chart 1 also show its RSI and MACD lines continuing to decline. That suggests more selling to come. It now appears likely that the QQQ could drop to its next potential support level along its July lows. The green horizontal bars in Chart 1 show that the July lows near 250 coincide with a 38% Fibonacci retracement of its March/September rally.

Chart 2 shows the S&P 500 also falling below its 50-day average and last week's low. Lower prices appear likely there as well. The next level of potential support is its late July low near 3200. The Dow is holding up a little better but is likely to follow the QQQ and SPX lower.

Chart 1

Chart 2

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Editor's Note: This is an article that was originally published in John Murphy's Market Message on Friday, September 18th at 1:30pm ET.

Chartists are often faced with a choice: wait for the breakout or anticipate using a mean-reversion setup. The Metals & Mining SPDR (XME) broke out of a bullish consolidation this week and the breakout signals a continuation of its long-term uptrend. Chartists keying off the mean-reversion setup could have anticipated the breakout and gotten the early jump. Let's investigate.

First and foremost, the long-term trend is up for XME. Price is above the 200-day SMA and the TIP Trend Composite has been net bullish since early August. This indicator aggregates five trend-following indicators and turns positive when three of the five are on active bullish signals. It is currently at +5, which means all five indicators are on active bullish signals. You can learn more about this indicator here.

After breaking above the 200-day SMA with a move from 20 to 25 (25%), XME took a rest and consolidated with a falling flag from early August to mid September. This is a bullish continuation pattern and this week's breakout signals a continuation of the bigger uptrend. A 25% advance from the flag lows would project a move to around 30.

Just before the flag breakout, XME produced a mean-reversion setup as the ETF tested the mid August lows and RSI dipped into the 40-50 zone (blue shading). The test of the lows amounted to a support test and an area to watch for a bounce. The RSI dip into the 40-50 zone denotes a mild oversold condition that can give way to a mean-reversion bounce. The combination of a support test and mild oversold condition alerted mean-reversion traders to be on alert for an upturn and breakout. A similar setup occurred in late June and early July when XME formed a falling wedge.

At this point I would consider the flag breakout bullish and valid as long as the flag lows hold (24). As far as the long-term trend is concerned, I would consider it up as long as XME holds the 200-day and the Trend-Composite remains positive.

The TIP Indicator Edge Plug-In for StockCharts ACP contains ten indicators to help you navigate the charts. In addition to the trend indicators, there is also a Momentum Composite and two volatility indicators. See this article for complete explanations and chart examples.

Looking for more analysis and setups for ETFs? Check out TrendInvestorPro.com. Each week we group and rank ETFs according to their trends, chart patterns and trading setups. This report also includes an ETF ChartBook with over 50 annotated charts and notes. Click here to take your analysis to the next level

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On September 30th, I'll be hosting a free webinar talking about the electric vehicle business. It's a rapidly changing world and there are lots of moving parts at play. We'll have the influence of Tesla's Elon Musk presenting Battery Day for Tesla on the 22nd of September. That should show up on the fan club chart!

Here is a little introduction to The Move To Electric! When you register for the presentation in advance, I'll send you a list of all the Electric Car companies I am following. You can register now!

The Move to Electric!

Don't forget to sign up here! Register here!

I've written multiple blogs about my pocket pads and how incessantly I jot down great insights and sustaining concepts whenever and however they cross my path. It's been a daily and profitable habit for decades.

Below is a link to a more descriptive past blog about the process, but here I'll simply share some of my favorite jottings from the past couple of years.

September 9th, 2016 Blog Article

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1

Becoming a dedicated investor is like building a 200 mph supercar in your garage piece by piece. Most of the time, it might sit there under a car cover depreciating while it waits for its moment in the sun. But then that one special day arrives when the cover comes off. You are a 200 mph hero with big horsepower — God it feels great! Similarly, you buy Microsoft at $20 or Amazon at $100 and it feels great. That doesn't happen very often, but it's worth the preparation.

2

We live in a digital age. These are internet times. Think fast, act decisively or perish! These days, procrastination is even more so a profit killer.

3

The best billionaire investors have "oh, crap!" moments. Expect it for yourself as well. Take it in stride and don't beat yourself up.

4

When I meet people that don't seem to have a discernible passion— one they wear on their sleeve — I usually move on. I gravitate to people with big passions that are smarter than myself.

NOTE: A brief pivot. Often, these points are a result of myself paraphrasing another commentator and adapting it to my own investing perspective. I apologize up front for not presenting full and proper credit for every insight herein.

5

As an investor, humble is good. No, actually humility is essential. My parents were simple folks. Our family crest was a crossed broom and shovel to remind us of that fact always. Whenever I forget it, the markets manage to remind me.

6

A consummate entertainer with a rhinestone piano once said, "Too much of a good thing is wonderful." My take on this — too much of a strong uptrend is a great thing. Enjoy the ride.

7

The world's greatest invention has been noise-cancelling headphones. Similarly, my charts have been the greatest media-cancelling eye glasses I could have hoped for. They cancel out the noise.

8

So many look back at the past and get all nostalgic. I look at the past and ask what lessons does it yield.

9

Focus on the process, not the outcome or the dollars you expect to make. A consistent process will lead to profits. Anything else is like a tail wagging a dog.

10

What's overrated today may not seem so in a year. Revisiting previous analysis with a fresh open mind often leads to newborn opportunities. Never say never. Look at it again.

11

It's equally as important for investors to know their own tendencies and to appreciate their true "investors selves" as it is for them to understand where their tendencies don't wish to go and exactly what kind of "investor selves" they are not capable of being. In other words, know thyself. The market is an expensive place to look for therapy.

12

Lists of "Best Stocks" or "Best ETFs" or "Best Analysts" are merely suggestions. I find it absurd when I see awards for the "Best Pinot Noir" wine. It may be worthy of my consideration, but I'll make up my own mind, thank you. ETFs and stocks are the same. I'll be the judge of what is "best" for my portfolio.

 

In closing, I once more ask you to reconsider my paraphrasing of Richard Rogers:

"I don't believe that investors do something extraordinary spontaneously. I believe it is the result of years of observational living, of diligent study, reading and dedicated practice. Finally, after cultivating the proper prerequisites, their experience, their personality and very temperament is just so and at that particular moment, all these come together and the investors are able to profitably express themselves."

 

Trade well; trade with discipline!

- Gatis Roze, MBA, CMT

StockMarketMastery.com

• Author, "Tensile Trading: The 10 Essential Stages of Stock Market Mastery" (Wiley, 2016)
• Presenter of the best-selling "Tensile Trading" DVD seminar
• Presenter of the "How to Master Your Asset Allocation Profile DVD" seminar
• Developer of the Tensile Trading ChartPack for StockCharts members

Last week, after presenting a "diamond in the rough" in Wednesday's Diamonds Report, Carl texted me and said that it looked like a "pig's ear" chart pattern. I had never heard him use this term (yes, Dad, never!) and decided to investigate further. Below is the chart he was referring to:

This is the chart as I presented it on Wednesday:

What I saw was a PMO that was nearing a BUY signal, a strong SCTR ranking, a positive RSI and an upside breakout from a consolidation zone. You can see why Carl named it a "pig's ear" just by the way it appears to be sticking out from the original rising trend, with that breakout putting the "point" on the ear. I was puzzled that he saw a bearish chart and not a bullish chart.

Well, today's AEM chart shows who was right... and it wasn't me. I then got very curious about this "pig's ear" pattern and looked for it in the Encyclopedia of Chart Patterns by Thomas Bulkowski. That is a book every chart pattern wonk should own. True to its name, it is an encyclopedia, overflowing with patterns you may not have even heard of. And the best part? He has back-tested them! You can learn more on thepatternsite.com. If you aren't a chart pattern wonk like me, Bulkowski's Visual Guide to Chart Patterns is also excellent. It covers the basic patterns and covers the psychology behind them.

Well, the "pig's ear" was not in the Encyclopedia of Chart Patterns, but "rectangle" patterns were, and.... drum roll... it is a bearish reversal pattern, not a continuation pattern. One may think it resembles a bull flag. I agree, which was why I considered that it was a continuation pattern. But let's get "textbook" - a bull flag has a downward sloping flag or a pennant (symmetrical triangle) on a flagpole. So this one actually resolved "pattern-wise" back to the downside, as expected. Right now, I'm bearish on AEM until it finds support at either the 50-EMA or the bottom of the rectangle. Based on Thomas Bulkowski's theory, it should actually break down out of that rectangle.

Conclusion: As they say, you learn something new everyday. The rectangle chart pattern is not a continuation pattern, it is a reversal pattern.

Do not miss our FREE DecisionPoint LIVE Trading Room on Mondays at noon ET. Details on registering for the Trading Room are below! Read on for the ChartWatchers "Diamond of the Week".

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Register for the Free Trading Room at this link or click above. Our next session is on 9/21/2020!

Here is a link to the recording from 9/14/2020 (Access Passcode: 3^aXxCJ2)

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DecisionPoint Diamonds are becoming even more indispensable! Not only do you get 60 "Diamonds in the Rough" stocks/ETFs per month, with complete analysis including stops/targets... but there will now be a Friday Diamonds Recap that will look at the performance of each week's Diamonds and their prospects moving forward. Over the weekend, we clean the slate and start over again.

Included for my Diamonds subscribers only is a one-hour trading room, "The DecisionPoint Diamond Mine" on Fridays! It will provide an opportunity for us to talk live, review current and past Diamonds for possible entries/exits/stops/targets and take your questions and symbol requests in this intimate trading room.

DecisionPoint Alert subscribers continue to enjoy clear, concise analysis of the overall market, including Dollar, Gold, Gold Miners, Oil and Bonds from both Erin and Carl Swenlin. You will be prepared each market day knowing the implications of market behaviors for that day, week and month!

All subscribers have access to our exclusive ChartLists, which are annotated and curated by Carl Swenlin. Know what he thinks is important for all of the sectors, indexes, indicators and more!

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Today's ChartWatchers "Diamond of the Week":

This "Diamond in the Rough" selection is from the September 17, 2020 DecisionPoint Diamonds Report. I have included the chart from Thursday with my original comments, after which I follow up with the current chart.

Axonics Modulation Technologies Inc (AXNX)

 

EARNINGS: 11/12/2020 (AMC)

Axonics Modulation Technologies, Inc. operates as a medical technology company, engaging in the design, development and commercialization of sacral neuromodulation solutions. The firm focuses on the treatment of patients with overactive bladder (OAB), fecal incontinence (FI) and urinary retention (UR). It offers rechargeable SNM systems, which deliver mild electrical pulses to the targeted sacral nerve in order to restore normal communication to and from the brain to reduce the symptoms of OAB, FI and UR. The company was founded by Guang Qiang Jiang, Danny L. Dearen, Timothy Deer, and Michael V. Williamson in March 2012 and is headquartered in Irvine, CA.

Thursday's Chart (yellow) and Comments:

"Down -0.69% in after hours trading, AXNX is my Diamond in the Rough today. I like the indicators here. The RSI is just getting positive and the PMO is about to give us a crossover BUY signal. In the thumbnail, you can see that the 20/50-EMAs are the current support point. I set the stop level to the March top. The SCTR had retreated from the "hot zone" above 75, but has recovered."

Friday's Chart (plum) & Comments:

I still like the chart. The RSI is positive and the "V" bottom is resolving nicely to the upside. The PMO has just triggered a BUY signal. Granted, overhead resistance is arriving soon at $46, but, based on the positive momentum and big volume, I don't think we will have a problem with it.

Weekly Chart & Comments as of today:

I like the RSI on the weekly, but I'm not thrilled with the PMO. The good news is it did turn back up. The 9.1% shows what the potential gain would be if it reached all-time highs from when I presented it on Thursday.

TRY US OUT! Don't forget, you can give our reports a try with a 1-week free trial by subscribing to the "Bundle" package and using coupon code: dptrialcw.

Happy Charting! - Erin

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Technical Analysis is a windsock, not a crystal ball.

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Helpful DecisionPoint Links:

DecisionPoint Alert Chart List (subscribers only)

DecisionPoint Golden Cross/Silver Cross Index Chart List (subscribers only)

DecisionPoint Sector Chart List (subscribers only)

DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

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At EarningsBeats.com, we provide our members with various ChartLists of stocks that we believe could give them an upper hand when trading. This includes our Short Squeeze ChartList, which currently has 79 companies that have short percentage of float above 20%. This means that many traders are betting against the stocks, some for a very good reason. The list shouldn't be viewed as bullish - in fact, quite the contrary. However, when stocks on this list break out above key resistance levels, a short squeeze can ensue, triggering a fast rise on unusually heavy volume. That's the purpose of the list - to attempt to catch short squeezes. As an example, take a look at the two charts below - Gamestop (GME) and Workhouse Group (WKHS) - both of which are currently on the list.

These stocks were added to the Short Squeeze ChartList on August 17. Since then, they've both risen by over 100% - not too shabby!

Of course, not every stock on the list has performed like these two, but they do provide an example of what can happen once a short squeeze is under way. In fact, our Chief Market Strategist Tom Bowley, who is the architect of the list, will be highlighting a new Short Squeeze Trading Candidate in our EarningsBeats Digest (EBD) this upcoming Monday. If you would like to see which company he is highlighting, just click on this link and fill out the form; you will get the EBD Monday morning featuring the stock.

Spotting stocks that have the potential for meaningful moves higher is not so easy. So imagine if you can zero in on those stocks that are clearing key resistance plus have high short interest. That's quite a powerful combo.

At your service,

John Hopkins

EarningsBeats.com