The NASDAQ completed a V pattern last Friday as the index hit 12,250. Looking at the past year, it’s fairly straightforward from here from a technical analysis perspective. As you can see on the chart below, 12,500 acted as a point of resistance a couple of times, dating back to June 2022.
If bulls can punch through and close north of 12.5k, then the index has enough open field to run as much as 1,000 points to 13,250. Meanwhile, below the NASDAQ has a couple layers of support, first at the 50-day moving average of 11,676 and doubled layer of hardened support at where the 200-day mark collides with a technical level between 11,400-11,500.
Strictly from a potential reward to risk standpoint, the current setup favors investors maintaining a bullish posture. Prices could pause in the immediate future, potentially drifting lower towards 12,000 or the aforementioned 50-day mark.
Under the current condition, investors might consider buying the dip. More patient types might wait for the NASDAQ to close north of 12,500. Index investors might look at Invesco QQQ Trust (QQQ) for either situation.
It was a strong week for many industries and sectors with only three from our list of 50 underwater. A pair of small bank exchange traded funds (ETF) and ETFMG Alternative Harvest ETF (MJ) were your negative performers. Mostly tech was at the other end of the list with ARK Next Generation Internet ETF (ARKW) as the king of the hill.
Although technology should be one of the best places to be if the NASDAQ follows the reward side of the script above, SPDR S&P Retail ETF (XRT) might be the chart we like best. The ETF recently broke a downtrend that began in early February. Along with a potential pivot, XRT printed a technical buy signal called a bullish MACD crossover.
The same situation occurred at the start of 2023. Back then, XRT rallied from less than $62 to more than $74 in early February. Of course, past performance is no guarantee of future success.
It’s a bit expensive at $497.03, but Costco Wholesale Corporation (COST) could be positioned to move higher. Shares of the discount store mirror the state of XRT as COST also busted out of a six-week slide. Costco is on the verge of the Golden Cross, when the 50-day moving average moves from below to above the 200-day benchmark. It’s a classic technical buy signal.
A golden Cross could help propel Costco higher and put it on a path to complete a V pattern, just like the NASDAQ. If that is the correct call, the top of the right side of the V is $530. As for downside, a close below $485 is where we might consider cutting losses.
NOTE: Short-term trading is risky and only for investors with maximum risk tolerance.