Mega Tech and Banks; Is the Breakout Real?
Lede
Today we look at some of the mega techs (AAPL and AMZN), with short-term strength, then a screen for smaller banks with strong relative strength (RS), and finally the largest US bank (JPM).
We note that there are two 5 minute videos at the end of this post for those that want a real dive into Pattern Finder. The product will be available next week!
Mega Tech
We perused mega tech and found two interesting charts.
We start with Apple (NASDAQ:AAPL) and a 3-year chart.
AAPL has bounced off of the algorithmically drawn trend support (red line) from Pattern Finder, which coincided with a series of congestion (pink lines).
For those that are a believer in the rally, the next historical congestion would be at about $150.
This move higher is tenuous given how short-term of a window we’re observing this rally.
A failure to rally could send the stock back to the lower congestion of ~$135. We note that the lower congestion line ($135) was formed with a cup and handle and an ascending base, so a breakdown below that could satisfy the abrupt bearish calls for a mini market crash; that’s to $120 or lower.
We then looked at Amazon.com (NASDAQ:AMZN):
AMZN evokes the same observations from us, with a slightly more convincing rise off trend support and a lot more room to what would be a bullish leg using the next series of congestion at about $135.
We note that both AAPL and AMZN have earnings due out very soon, so caution to all.
Time to Screen for Banks
We then looked at a screen for banks:
We screened for banks over $1B in market cap, with at lest 10% revenue growth in the last year, and then leaned our proprietary EPS rating — looking for the top 10% (above 90) — and the 3-month RS compared to its industry also in the to 10% (above 90).
We found four banks:
We went through all four and they each had a similar feel.
Here is First Citizens Bancshares (NASDAQ:FCNCA), the bank with both the highest EPS rating and 3-month industry RS.
(We expanded the company ‘Snapshot’ in the upper left hand corner since we’re not familiar with the company.)
The chart looks stronger than mega tech, but the price is right at the series of congestion (pink line) and if we really look closely, that congestion is pretty convincing.
It’s establishing points (the little circles) hit eight times since Jan 2021, including the top of both sides of the cup in a cup and handle.
Perhaps FCNCA gets the buying volume to push it higher, but all regional banks didn’t look as good as the mega bank, JPM.
The rally here feels the strongest of the bunch and we note that the stock rise came off of an earnings report on 10-14-2022. The trend resistance (green line) looks like the next bullish stop unless the market does a… ya know… market.
Conclusion
In total, the AMZN chart looks stronger than AAPL, but in fairness with earnings due out very soon for both, it’s a coin flip until after then.
Regional banks look strong, but also closer to end of short-term rallies rather than the start. JPM looks the strongest of the bunch with that earnings punch higher.
But, in general, this all feels quite slippery, and for now we are still firmly in a bear market until proven otherwise with the indices.
And, finally, we share two videos for you!
First, a 5 minute video of Pattern Finder’s charting (using Tesla):
And another 5 minute video on screening:
What’s Next
We will continue to share charts, screens, and short discussions over the next few weeks before the CML Pattern Finder product becomes available in late October.
It’s a week away!!!
The product will have everything IBD MarketSmith® has, a lot more, like algorithmically drawn support and resistance trend lines, built with better, faster, more flexible, and more responsive technology.
It allows for additional technical signals beyond just those offered by the CANSLIM methodology, far richer fundamental screening data, but…
… it will cost 70% less. Yes, 70% less.
Stay tuned to this channel.
Thanks for reading CML Pattern Finder.