Tuesday, March 29, 2011

Daily Market Commentary: Bullish Engulfing Patterns

Markets opened weak but were able to make back lost ground and then some. The S&P confirmed a breakout from the downward channel on heavier volume (but light volume compared to what's gone before).

($SPX)

via StockCharts.com

The Nasdaq offered a sizable bullish engulfing pattern, without the higher volume accumulation, but with enough juice to outperform the S&P (on a relative basis).

($COMPQ)

via StockCharts.com

Nasdaq Breadth continued to improve with a MACD trigger 'buy' and a rise in stochastics from oversold conditions.

($BPCOMPQ)

via StockCharts.com

While the Percentage of Nasdaq Stocks above the 50-day MA shifted technicals net bullish after stochastics crossed the bullish mid-line.

($NAA50R)

via StockCharts.com

Small Caps also cracked out a bullish engulfing pattern as it hugged former support higher. Since early February Small Caps have been outperforming Tech, and Large Caps since mid-May. As the leading index it should be favoured by buyers.

($RUT)

via StockCharts.com

With a number of bullish engulfing patterns appearing in different markets - albeit weakened by the lack of an oversold market (so they are not a slam dunk) - there is a good chance for some upside follow through tomorrow. As for support, the Nasdaq and Nasdaq 100 were able to lean on 20-day MAs following morning weakness. While the S&P defended its 50-day MA. Stops can be trailed on a break of these key averages.

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Dr. Declan Fallon is the Senior Market Technician and Community Director for Zignals.com. I offer a range of stock trading strategies for global markets which can be Previewed for Free with delayed trade signals. You can also view the top-10 best trading strategies for the US, UK, Europe and Rest-of-the-World in the Zignals Trading Strategy Leaderboard. The Leaderboard also supports advanced search capability so you can tailor your strategies to suit your individual requirements.

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