Technical Strategy Video:
Key Takeaways
- SPX push to new all-time highs is slowly starting to be seen in other indices and Groups. While negative divergence is present, we’ll use these levels as the “dividing lines in the Sand” QQQ-400, IWV-275.87, and SPX 4723- Above it’s right to be bullish, while below requires caution.
- Cryptocurrencies look to be jump-starting their own Santa Claus rallies, as BTCUSD, ETHUSD, SOLUSD, MATICUSD, AVAXUSD and many others have all jumped to new highs for the week. Long Bias is proper for Crypto into mid-January
- LLY, CTSH, VMC, G, and PKI are five technical standouts that look attractive for the weeks ahead
SPX’s all-time high close was not matched by similar moves by QQQ 2.13% , nor DJIA just yet, but it does look like a constructive move for SPX, and slowly but surely we’ll see if other indices can start to follow suit. Make no mistake, having conviction in a “Santa Rally” is less about SPX, but more about seeing the broader market starting to show more strength following a damaging last six weeks of trading. Given that DJ Transportation Avg remains >2,000 off November highs and IWM 1.11% is also lower by more than 8% since 11/8, it’s necessary to at least discuss these divergences, not blindly write them off and focus on the Tech-led SPX and NDX. Overall, getting above IWV -275.87 and QQQ-400 will put these market gauges on more solid footing
Top Technical Longs to Consider: The five stocks below have excellent technical structure and are technical long candidates to consider as 2021 heads to the finish line. Most have great long-term bases which are being exceeded, or showing promising signs of above-average relative strength. I find all of these attractive and like buying at current levels, technically, and would add to positions on minor weakness in the next week. Analysis, targets and stops are below.
Eli Lilly (LLY- $273.10) LLY -2.77% is one of the more attractive risk/rewards within the Pharmaceutical space, technically. It’s four-month Cup and Handle pattern gave way to a high-volume breakout last week, and recent consolidation looks to have held where it needed to before pushing back higher. Targets for LLY lie initially near $307, then $320 before this finds much resistance. Only a move back under early December lows near $247 would change this structure, necessitating hedging/stops. At present, LLY looks very appealing technically, and is expected to push back to new highs.
Cognizant Technology (CTSH- $86.29) CTSH looks quite attractive after having successfully pushed up above December 2020 highs which puts this back in new all-time high territory. Additionally, the level of peaks from December lies $2 away from former all-time highs going back since Spring of 2018. Thus, this breakout has additional appeal in having surged above not one, but two former peaks in what appears to be a technical Cup and Handle pattern. While momentum is close to getting overbought, the technical structure in CTSH -0.03% is very good at current levels following such a large base breakout. Follow-through up to $90 looks likely, while only a decline under late November’s $76.79 swing low would postpone this rally.
Vulcan Materials (VMC– $206.36) This Basic Materials company has gained in technical appeal following the minor breakout last month of its seven-month base. This was followed by a successful retest and is now pushing higher to make a new all-time high weekly close as of 12/23/21. Momentum is not overbought given the recent consolidation, but technical structure looks favorable in VMC to support further strength up to targets near $215, then $225. Stops would be placed under early December lows at $188.90.
Genpact Ltd. (G-$52.36) This Outsourcing/IT Services company has seen its stock break back out to new all-time highs just in the last few days. This effectively clears the base which has contained its price action since May and should provide energy for Genpact to continue higher to targets near $55 initially, then $60. While Thursday’s close showed intra-day weakness into the close, suggesting this has run a bit too far too quickly, the weekly chart still managed to make a new all-time high close over peaks made into early September. Long positions preferred, looking to buy dips at 51.50-52 if given the chance in the weeks to come. Only movement under $49.09 from earlier this week in G 0.10% would take away from the attractiveness of this name.
PerkinElmer (PKI- $193.77) This Life Sciences stock has particular appeal given the push back up to new all-time highs following a very shallow three-month period of consolidation. Thursday’s 12/23 close finished near the highs for the day’s range and for the week, and suggests immediate follow-through might be possible to targets up at $200.
PKI ’s pattern, similar to some others listed in this report, has a very nice basing pattern which has just recently been resolved by a push to the upside. This particular formation resembles a reverse Head and Shoulders pattern quite closely. Thus, when measuring its recent low to high range for purposes of intermediate-term target projection, one arrives at targets near $220 which might be possible above $200 before any meaningful slowdown. Only a selloff under $175 changes this technical structure for the worse. Until then, it’s right to use minor weakness to buy dips.
