Q1 Corrections, Mean Reversions, Rotations: Weekly Nifty 9

Research Report Insight #1

Good stuff Edward and I urge our readers to review what Edward offered about TIME/DURATION and pair it with the following data:

We’ve been chatting up the Facebook (FB) chart with Finom Group members in the Trading Room over the past couple of weeks. I’ve posted several charts recently on Twitter, but in terms of the “beautiful bean footage” Edward previously referred to, by way of my recent tweet… The breakout in the wedge we see in the chart below was a clear signal for investors/traders. (March 20, 2021)

My thesis, prior to this bullish breakout was that the stock had been generating accumulation, and investors should take notice, traders should also look for a “rental”. While FB is less than 1% holding in the Golden Capital Portfolio, I have been suggesting that our members accumulate on pullbacks. In our Trading Room on Friday, to pad the portfolio gains on the year, we did just that and bought the pullback. The trade alert for our members is depicted below; it delivered a quick intraday profit. We trade, we invest, we act locally on price action, but also consider the long-term implications for every trade alert

Research Report Insight #2

The Nasdaq itself has remained under pressure for weeks, much like Consumer Staples had in the past. Every attempt for the Nasdaq to rise back above its 50-DMA has been met with selling pressure. It’s actually a beautiful battle that has ensued over the last couple of weeks that now finds the Nasdaq sandwiched between its 50 (light purple) and 100-DMA (green), as depicted in the chart below:

  • 50-DMA: 13, 426.
  • 100-DMA: 12,885.
  • 1-yr trend line continues to prove support.
  • Bullish objective: Get above 50-DMA.
  • Bearish objective: Break below 100-DMA and 1-yr. trend line on a closing basis.

At present, and to complete the trading week, I’m of the opinion that the impetus remains to buy the dips in the Nasdaq, QQQ, and tech industries like semiconductors and/or software. I shy away from predicting what will happen in the week ahead, given the consistent rising yields vs. tech narrative. Having said that, we can look deeper at the probabilities by way of breadth and tech industries going into the final trading days of the quarter. Speaking of the end of quarter rebalancing, kind of…

We know that there will be rotations that happen near and at the end of the quarter. As Mutual and Pension funds are forced to rebalance their portfolios, the rotations are becoming more understandable in Consumer Staples and possibly in the huge rally for the Nasdaq in the final trading hour on Friday. (Chart above from Daniel Cox).

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