Cyber-Security and Uranium stocks - Two key areas of technical focus
Technical Strategy Video (Recorded Thursday, October 14th):
Key Takeaways
- Equity indices have moved up to a make-or-break area for bulls and bears alike. Above SPX 4465 would suggest a move to 4650-4700 is underway, and for NDX-15,400
- Cyber-security is a key focus within the software space, and many of these stocks and the ETF’s are quite constructive technically
- Uranium is a key area of focus, and this entire space is quite bullish technically
Rally in NASDAQ 100 has neared an important area, not unlike S&P and DJIA after this week’s bounce. It’s thought that NASDAQ should likely lead markets in both directions, making breakouts in NASDAQ something to watch for in the days/weeks ahead. Rising above 15,200 would be an initial good sign. Then movement above 15,400 allows for a push to new highs.
Technical Developments
- S&P, NDX, DJIA have broken downtrend lines from September which is constructive.
- Structurally, Elliott-wave patterns still suggest that more is needed before giving an “All-clear” for Equities, namely 4465 for SPX and 15,400 for NDX
- Breadth finished an impressive 4/1 bullish and it’s thought that even if the back half of October were to be weak, that breadth and momentum have bottomed for October and won’t make new lows this month
- Groups like Industrials, Discretionary, Materials, Communication Svcs need to show more strength to breakout, as none of these groups joined SPX nor NASDAQ in pushing to new highs in August. Thus, more proof is needed
- Weekly momentum remains negatively sloped, as per MACD. While RSI is no longer overbought and Daily MACD has turned bullish, this is thought to be a tricky time headed into mid-October, and no rush to jump the gun before markets make more convincing proof of a breakout.
- Energy and Financials remain key areas of technical focus as Overweights. It’s still thought that Treasury yields might push higher. Thus, Financials likely benefit under that scenario, while Tech could lag a bit more.
The chart below is of the Global X Cybersecurity ETF, (BUG-1.51% ) which is one of my preferred areas to position within Software. Stocks like ZS, CRWD are standouts in this space, and the ETF has carved out a picture-perfect breakout into September following a lengthy base. Its recent weakness to test the area of this breakout at the so called “pivot” makes this particularly timely to consider now technically, just as BUG has exceeded its one-month downtrend. I’m expecting a rally back to the high $30’s, and this group should be one to favor.
The Uranium space appears like a key area to overweight technically. Furthermore, for those that have been anxiously awaiting the precious metals rally, this might be an area to consider as an area to position before more convincing proof of a Gold or Silver rally gets underway. Cameco (CCJ-$25.29) shown below, is one of the leaders in this space and looks ripe to continue showing strength in the weeks/months to come. Further upside looks likely to targets initially at 31 with additional upside possible on an intermediate-term basis to 35.35-36.50. Structurally, this began to show real signs of life back in December of last year when it made a monthly close at new five-year highs on very good volume. The stock’s 70%+ rise in around three weeks into early September 2021 really helped to jumpstart its momentum, and it corrected only around 61% of this move into late September before immediately pushing back higher to challenge these highs in the last couple weeks.
While momentum gauges on monthly charts have grown overbought, it remains early to fight this trend technically as CCJ0.82% has begun to show real structural improvement. Movement to test and exceed September highs at 26.76 look probable into late October, which should help this parabolic rise continue. Technical targets at $31 represent not only a 50% retracement of the entire 13-year decline from 2007 but also a Fibonacci extension of the rise from mid-August, which would allow this most recent surge from 9/24 to be equal in price terms to the initial rise from 8/20. Only a weekly close down under $23.23 would postpone this rise and at present, it seems like price should continue this ascent in the days ahead. Volume has come in far stronger on rallies than pullbacks, and this week’s totals from 10/12, 10/13 proved to be the highest we’ve seen in a month’s time. Please see the Cameco (CCJ0.82% ) daily chart below:
