The weekly chart of QQQ shows that it retraced to its 30 week average (red solid line) last week. If it holds the 4 week average (red dotted line) and the 30 week average this week I think the new up-trend is intact. If it closes this week below the 30 week and the 4 week, we are likely in store for much more weakness.
I tweeted earlier Sunday, @wishingwealth, about the need for more examples of failed break-outs to help people learn how to recognize when a break-out fails. Many break-outs fail, especially in a declining market. BJ had a failed green line break-out on Friday. It failed to close above its green line (74.09) on Thursday and closed below it on Friday. When a stock closes back below its green line I must sell out. If a set-up is violated one must always sell. If BJ were to close back above its green line, it might be a buy.
The GMI remains Green and is at 5 (of 6). Note however how few (2) of the GMI2 components are positive. The GMI2 is sensitive to very short term moves. Friday was a weak day.
As long as the QQQ remains above its 30 week average I am trading stocks. I will not transfer my university pension funds back into mutual funds for a little longer, however. The market bottom could really be in but if the Fed starts to raise rates repeatedly again it could kill the rally. I would like to see a retest of the bottom. And many bottoms occur after October weakness. Remember the famous saying, Go away in May and come back at Halloween!
So many stocks are rising now that I can’t resist some. One stock that I am slowly accumulating is GNRC. My stock buddy, Judy, brought this company to my attention years ago. Generac makes electric generators and is also working with solar. Whenever we have bad hurricanes the stock tends to rise. And we are entering hurricane season. I am not trying to benefit from people’s misfortunes, only from a company making profits by helping customers to retain their electricity. How shocking!!!! (pun intended)
MarketSmith says 2022 earnings are expected to grow 26% and their latest quarterly earnings and sales were up 25% and 40%, respectively. Below are a few charts that helped me to analyze GNRC’s trajectory.
The monthly chart shows that the stock is below its last green line top, which is a negative for me. There are many people who bought higher that may want to sell if they can get their original investment out. But it is a seasonal rally that I am looking for. It may not take the stock back to an ATH. And maybe it will…
The weekly chart shows some evidence of strength. There are some big black above average volume bars at the bottom and the stock has retaken its 30 week average, a very good sign. Note it closed near last week’s high.
I also like the daily chart. Thanks to listening to Richard Moglen’s interview with Pat Walker and his appearance at my class,I have recently become a fan of the 8 and 21 day exponential moving averages. I also know that the IBD/MS folk follow the 21. Note that the 8 day exponential moving average has been above the 21 day exponential average for 18 days and bounced off of the 8 three trading days ago on Wednesday. A few days ago the stock took a big hit after earnings were released but it has recovered almost all of the decline, another sign of strength. As long as the stock holds its rising exp 8 average I believe that the up-trend is intact.
I have created a new scan to find promising stocks that just bounced up off their exp 8 day average. Here is a chart of one of them. DGII also had a recent high volume GLB, a big plus. I do not own it but let’s see if the bounce holds next week. Note how many bounces off of the rising Exp 8 it has had. If I purchase on a bounce set-up I must sell immediately if the bounce fails. Other stocks that came up on this scan are: CNC, LMT, MLI, SO and ENPH. These are not recommendations, just for teaching purposes. I always check IBD and MarketSmith statistics before I buy anything.
While the QQQ is in ints 15th day of a short term up-trend, I find it useful to look at how its adapted GMMA charts look. This consists of 12 exponential moving averages with different periods and a 13th average equal to 1 which shows the current price. In an up trend one wants to see the closing price (dotted line) leading all of the other averages higher. The 6 shorter averages are red and the 6 longer averages are blue. I draw it on a white background. When the red averages are rising above the blue leaving a white space between them I call it a RWB up-trend. The opposite is a BWR down-trend. These charts also reveal bases when all of the red lines come together, thus showing no price differences over the 6 shorter time periods.
This hourly chart shows that the QQQ is in an hourly RWB uptrend that is forming a small base with the red lines converging. I am watching for a move up or down out of the base this week.
The daily chart also shows QQQ in an RWB up-trend. So QQQ is resting within a longer term daily up-trend. Will it fail as it did last April?
However, the weekly chart shows that QQQ remains in a longer term BWR down-trend. Note the strong weekly RWB up-tend in all of 2021. That is the type of market where people can make a lot of money. I will consider wading into the market in my conservative university retirement accounts when we get a new weekly RWB up trend. Such an up trend can last for months and give me considerable opportunity to profit. The time to exit from an up trend is when the white space disappears as it did at the end of 2021. GMMA charts are also useful for analyzing individual securities.
The GMI declined to 4 when QQQ closed back below its 30 week moving average on Friday. But it remains on a Green signal.