After a broad market review, Mary Ellen shares strategies for trading pull backs and breakouts in stocks. Highlights include a deep dive into ARK’s Innovation ETFs and their holdings, locating market strength in the process. Tune in for valuable insights and tips to help you make informed investment decisions!

This video originally premiered December 6, 2024. You can watch it on our dedicated page for Mary Ellen on StockCharts TV.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

The first trading week in December started on a positive note, with the S&P 500 ($SPX) and Nasdaq Composite ($COMPQ) notching new all-time highs, while the Dow Jones Industrial Average ($INDU) pulled back slightly. Despite the small upmoves for most days, it wasn’t a quiet week.

Surprisingly, a flood of news from around the world didn’t impact equity performance much. The broader equity indexes continued their bullish trends despite South Korea briefly going under martial law, the collapse of the French government, Fed Chairman Jerome Powell’s speech, and the higher-than-expected jobs number.

The stock market’s tone is bullish, and volatility is low. The Cboe Volatility Index ($VIX) is now below 13.

This StockCharts MarketCarpets snapshot below shows the S&P 500’s weekly performance. The heavily weighted mega-cap stocks fared well, but the best weekly performer was American Airlines (AAL), with a 19.83% gain.

FIGURE 1. STOCKCHARTS MARKETCARPETS TOOL FOR DECEMBER 6. Mega-cap stocks performed well this week. American Airlines was the top performer for the week.Image source: StockCharts.com. For educational purposes.

One area to watch is the small caps. The S&P 600 Small Cap Index ($SML) broke above its trading range in early November. It then pulled back and bounced off its support level (see chart below).

FIGURE 2. DAILY CHART OF S&P 600 SMALL CAP INDEX ($SML). After breaking out of a trading range in early November, $SML pulled back and bounced off a support level. It then consolidated and broke below the consolidation range. Is it heading back to its support level?Chart source: StockCharts.com. For educational purposes.

Since November 25, the index consolidated and broke below the consolidation pattern. $SML could be on its way back to the support level between 1440 and 1450. Generally, small caps start rising mid-December and continue into the next year. This is known as the “January Effect,” so it’s likely that $SML will bounce off that support and move higher. The market breadth indicators for $SML—percentage of stocks trading above the 50-day moving average and the advances vs. decliners are also declining. I’ll be carefully watching the price action in the next few weeks.

Solid Week For Crypto

This week was a big one for cryptocurrencies. Bitcoin to US Dollar ($BTCUSD) closed above 100,000, a record close. The weekly chart below shows that $BTCUSD had a strong upward move after breaking out of its consolidation pattern from March to October.

FIGURE 3. BITCOIN SURGES. The cryptocurrency successfully closed above its 100,000 level on Friday.Chart source: StockCharts.com. For educational purposes.

The moving average convergence/divergence (MACD) is very bullish. The rise in cryptocurrency prices shows investors’ risk appetite is pretty strong.

In Other News

The broader equity indexes may have been moving up in dribs and drab,s but some stocks saw significant gains, mainly due to earnings.

Shares of Docusign (DOCU) rose on much better-than-expected earnings. Docusign’s stock price closed up by 27.86% on Friday. Lululemon Athletica, Inc. (LULU) is another stock that saw a 15.90% rise in its stock price on stellar earnings. Other retail and software companies, such as Amazon.com, Inc. (AMZN), International Business Machines (IBM), American Express Co. (AXP), and Home Depot (HD), saw significant percentage gains in Friday’s trading.

Next week, we get earnings from Adobe Systems, Inc. (ADBE), Broadcom Inc. (AVGO), Oracle Corp. (ORCL), and Costco (COST). All these stocks saw healthy gains this week. Although a big chunk of earnings is behind us, there are some exciting ones on deck.

Bond Blues in Rear-View Mirror?

Treasury yields declined while bond prices rose a little. The weekly chart of the iShares 20+Year Treasury Bond ETF (TLT) below shows TLT approaching its first resistance line. This happened before, which caught me off guard—a lesson learned. But now that bonds are creeping back up, I may give it another go.

FIGURE 4. DAILY CHART OF TLT. Bond prices are rising slowly but it may be a while before there are significant moves, given the low bond volatility.Chart source: StockCharts.com. For educational purposes.

Bond volatility is low, as seen by the ICE MOVE Index in the lower panel. This suggests that bond price movement may be small, so this time, I might wait until the next resistance level, just above $102, before I go long.

Next week is light on economic data, but we will get the November CPI and PPI. There’s also the  December 18 Fed meeting. I’d wait for these events before making investment decisions on TLT.

According to the CME FedWatch Tool, the probability of a 25 basis point rate cut at the Fed meeting is around 85%. It’s more important to hear what the Fed says about interest rate cuts for 2025. If it’s different from what the market has priced in, that will have more of an impact on the market.

End-of-Week Wrap-Up

• S&P 500 up 0.96% for the week, at 6090.27, Dow Jones Industrial Average DOWN 0.60% for the week at 44,642.52; Nasdaq Composite up 3.34% for the week at 19,859.77
• $VIX down 5.48% for the week, closing at 12.77
• Best performing sector for the week: Consumer Discretionary
• Worst performing sector for the week: Energy
• Top 5 Large Cap SCTR stocks: Applovin Corp. (APP); Palantir Technologies (PLTR); Reddit Inc. (RDDT); MicroStrategy Inc. (MSTR); Axon Enterprise, Inc. (AXON)

On the Radar Next Week

• November Consumer Price Index (CPI)
• November Producer Price Index (PPI)
• 30-Year Mortgage Rate
• Earnings from Oracle (ORCL), Broadcom (AVGO), Adobe (ADBE), Costco (COST)

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

As part of your daily trading routine, you likely start the day by checking the news and stock prices to identify potential market opportunities. However, as you already know, news and price performance can only give you a snapshot context—a starting point for a much more thorough analysis.

Financial media often highlights the price performance of notable stocks, but understanding its significance is another matter. A single price snapshot doesn’t uncover trading opportunities, but analyzing price within the context of consistent movement can.

One way to get a comprehensive view of this context is using a MarketCarpets chart configured to display [Up Days] – [Down Days].

What is MarketCarpets’ Up Days – Down Days?

This indicator setting counts the number of days a stock moves higher, then subtracts the number of days it moves lower, during a specified timeframe. (It’s best to start with at least a 5-day change.)

Why use this indicator? It’s all about consistency, or finding stocks with consistent increases or decreases. For instance, a stock’s one-day jump tells you very little. From where did it jump? What was its price action in the previous days? What is its trend context?

A single day’s movement can be unreliable simply because it doesn’t say much beyond the current day. You’ll have to check the charts to get a broader context. Fortunately, you can save time and get an overview of all stocks using MarketCarpets’ Up Days – Down Days setting.

For example, look at what happened in the Technology Sector -> Software Industry on Wednesday (see image below). The stock that pops out immediately is Microsoft Corp. (MSFT), not only because of the size of its market cap but also the company’s overall significance in the tech industry and beyond.

FIGURE 1. MARKETCARPETS CHART OF SOFTWARE SET TO ONE-MONTH VIEW OF UP DAYS – DOWN DAYS. MSFT, up 9 days, is the largest stock by market cap in this segment.Image source: StockCharts.com. For educational purposes.

If you hover over the square, you’ll get a small pop-up showing you MSFT’s chart. But we’ll take a closer look to drill down into the broader context of this MarketCarpets reading. MSFT has had nine up-days minus down-days over the last month, but what exactly does that mean, and does it present a tradable opportunity?

Let’s start with a daily chart of MSFT. 

FIGURE 2. DAILY CHART OF MSFT. After being in a trading range for about four months, Is MSFT poised for a breakout?Chart source: StockCharts.com. For educational purposes.

Given Microsoft’s significance in all things “tech,” it wouldn’t hurt to get a breadth reading on the sector’s performance. To this end, the S&P Technology Sector Bullish Percent Index, $BPINFO (see magenta square), tells you that over 70% of tech stocks are exhibiting Point & Figure buy signals, which indicates cautious bullishness, as some stocks may be overbought.

MSFT’s sideways movement, a range that lasted nearly four months, coincided with negative buying pressure in the Chaikin Money Flow (CMF). But the current attempt to break above resistance at $440 is accompanied by a notable surge in buying pressure (see magenta rectangle in the CMF panel).

A bullish trader would likely enter a long position at a break of $440, set a stop loss at $425 (given the concentration of trading volume — see the magenta line and Volume-by-Price), and watch $466, MSFT’s all-time-high as a technical target price (fundamental targets will differ).

In contrast, let’s look at the worst performers using the same MarketCarpets view. You can do this by cycling through each sector on MarketCarpets to get a comprehensive view of which industries seem to be underperforming. Here’s what I discovered in the Investment Services industry within the Financial sector (see image below).

FIGURE 3. ONE-MONTH MARKETCARPETS CHART OF THE FINANCIAL SECTOR’S INVESTMENT SERVICES INDUSTRY. Among the big brokerages, Morgan Stanley (MS) appears to be one of the bigger underperformers.Image source: StockCharts.com. For educational purposes.

If the MarketCarpets’ Up Days minus Down Days calculation indicates weakness or underperformance, it helps to look at the wider context of trend, momentum, and overall technical strength.

Morgan Stanley (MS) has experienced more down days than up days over the past month relative to its peers. Could this signal weakness weighing upon its share price? Let’s shift to a daily chart for a closer look.

FIGURE 4. DAILY CHART OF MORGAN STANLEY. A rounding top pattern can indicate a toppy stock, although it can bounce off the bottom of the pattern formation.

MS is forming a rounding top pattern coming off a wide gap following a flag pattern. A rounding top is traditionally considered a bearish reversal pattern (though it can sometimes do the opposite and bounce at the bottom of the formation, so watch out). If it breaks below $128, the bottom of the formation, it’s likely to find support at the 50-day Simple Moving Average (SMA) line or the most recent swing high point at $120.

Some traders might see this as a shorting opportunity (below $128), while others may see it as a buying opportunity (at $120, for instance). Whatever you decide might be the better way to go, it’s important to consider a few other mixed signals:

• The stock’s technical strength, as measured by the StockChartsTechnicalRank (SCTR) line, is favorably bullish at 84, indicating that the current weakness might be setting up for a minor pullback. A break below 70 would indicate technical weakness.
• The CMF indicates that selling pressure dominates the stock’s momentum, indicating the possibility that the stock’s reversal may be more than a mere “breather.”

Whether MS is poised for a minor pullback or a larger reversal, you’ll gain clarity once the price reacts to the key levels, allowing you to make your move.

These are just a few examples of many stocks you might have found using the MarketCarpets’ Up Days – Down Days tool. Try it out yourself and create a ChartList with your top 5 to 10 stocks. This will help you track their performance and identify trading opportunities over time.

At the Close

Incorporating MarketCarpets into your daily trading routine can significantly enhance your ability to find trading opportunities at a near glance. The Up Days – Down Days indicator, in particular, offers valuable insights into consistency in near-term price trends, helping you focus on stocks with sustained upward or downward movements. Make this tool a part of your routine, and build a ChartList to monitor the stocks you find.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

The broader stock market indexes sold off slightly ahead of the November Non-Farm Payrolls data, which will be released Friday morning. Depending on which way the data goes, the market could sell off further or continue its bullish ride. If the market sells off, which stocks are flashing buy signals? To help me identify stocks to watch, I ran my StockCharts Technical Rank (SCTR) scan to identify which stocks were gaining technical strength.

My SCTR scan filtered 53 stocks and ETFs, which I sorted based on the universe (U) (the scan syntax is at the end of the article). I prefer to look at large-cap stocks and identify which ones are potential investing candidates. Going down Thursday’s list, the first stock that interested me was Cisco Systems (CSCO), mainly because of its simple and clear-looking chart.

Simplicity Attracts

The weekly chart of CSCO stock shows it reached a new all-time high on a relatively sharp upside move since the week of September 9. CSCO’s stock price is trading above its 5-week exponential moving average (EMA) and its 15-week simple moving average (SMA).

FIGURE 1. WEEKLY CHART OF CSCO STOCK. The SCTR score is just above 76, the stock price is trading above its 5-week EMA, and its RSI has crossed above 70. There’s no indication of a reversal in the uptrend.Chart source: StockCharts.com. For educational purposes.

The SCTR score has crossed above the 76 threshold, and its relative strength index (RSI) is just above 70. From the data in the Symbol Summary page for CSCO, the stock is up 29.29% over one year. These are all indications that the price action in CSCO stock remains bullish.

Let’s now examine the daily chart of CSCO stock to determine whether it is worth buying and what the ideal entry and exit points will be. The daily chart confirms the shorter-term trend is still up. The upward-sloping trendline coincides with the 21-day EMA, and trading volume is slightly increasing.

FIGURE 2. DAILY CHART OF CSCO STOCK. The stock has retained its uptrend bouncing off its 21-day EMA. CSCO is also outperforming the Nasdaq Composite slightly. The Full Stochastic oscillator indicates the stock is overbought.Chart source: StockCharts.com. For educational purposes.

CSCO’s performance shows it’s outperforming the Nasdaq Composite ($COMPQ) by 15.64% (see panel below CSCO stock price chart). The Full Stochastic oscillator shows the stock is overbought but, as you can see from past data, the oscillator can stay overbought for an extended period.

The Game Plan

CSCO may not be as glamorous as some of the other mega-cap tech stocks, but its path is a steady and slow uptrend. This may be the reason it’s outperforming the Nasdaq and possibly some of the other more volatile mega-cap stocks, such as NVIDIA Corp. (NVDA), Microsoft Corp. (MSFT), and Apple, Inc. (AAPL).

If CSCO’s price action continues grinding higher slowly and steadily, I would look for a pullback, which might be to the 21-day EMA or above. I’ll watch the market closely on Friday after the November NFP report is released to see if there’s a selloff or if market continues rising higher.

As long as the technicals stay in place for an uptrend, the stock is a buy. When any of the indicators no longer support the uptrend, you abandon the stock or do not even consider buying it.

Sometimes, as Bruce Lee would say, “Simplicity is the key to brilliance.”

The SCTR Scan

[country is US] and [sma(20,volume) > 100000] and [[SCTR.us.etf x 76] or [SCTR.large x 76] or [SCTR.us.etf x 78] or [SCTR.large x 78] or [SCTR.us.etf x 80] or [SCTR.large x 80]]

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.