March 20, 2022

The Nasdaq put in a memorable four-day rally this week that picked up speed after the Fed on Wednesday hiked the overnight fed funds rate by a quarter-percent. The move put the growth barometer just an inch above its 50-day moving average line.

As noted on Twitter, in the last 20 years, the Nasdaq had only put in a bigger four-day move off of a low in the new bull markets of '02, '09, and '20. Each of the four days saw price rise by at least 1%, something I do not recall seeing after a low was printed.

Friday's action qualified as a fourth-day O'Neil follow-through on the Naz, something that has not occurred in some years. While we do not accord as much attention to FTDs as others, seeing one is certainly a positive.

Another positive has been the breadth of the advance. Recall that we have used the advance-decline ratio to qualify a short-term rally attempt off a low.

As well, the advance came amid fears of higher inflation due to the Ukraine war. So the news was bad which is consistent with the way bottoms are formed.

Of course, four days does not indicate a new bull market has begun. That will not be known until sometime in the future. Further, it is to be remembered that history's biggest single-day gains occur as bear-market rallies.

The biggest gains this week came from the beaten-down technology segment. This emphasis on deep bargain-hunting is normally what happens after the market recovers from a significant swoon.

The dilemma we are faced with is that very few growth issues provide attractive technical entries. For example, Block (SQ), formerly known as Square, soared 48% in the last four days. This is tremendous relative strength. However, at 51% off its 52-week high, it is faced with a ton of overhead supply that we will pass on. Bill O'Neil only buys things within 15% of a 52-week high. We usually use 20% as a maximum, with exceptions.

The two best names are Axcelis Technologies (ACLS) and Rambus (RMBS), technically, though these are extended. We will watch these with an eye toward entering on a pullback.

TQQQ, the 3x QQQ ETF, is nicely above the 20 ema, but extended. We will look to enter this on a pullback. Because this is a powerful move in the averages, any pullback may be fleeting. This might provide a less-than-optimal entry, but is in itself a good sign as overbought that stays overbought should not be pooh-poohed.

The following names are believed to be the most attractive for our strategy of speculation in the $13+ market. Expand a chart by clicking on it.

Alpha & Omega Semiconductor (AOSL)

Nvidia (NVDA)

Pure Storage (PSTG)

In summation, it is not necessary to know whether this is a bear market rally or a new bull market. All that is necessary to know is where the averages are positioned with respect to their 20 ema's, plus whether some names are buyable. On the latter, the pickings are slim, but should improve in time.

Kevin Marder

Trading Lessons
Introduction to the service (38:00)
Money management and risk management (20:27)
Bread and butter pullback (11:10)
Bread and butter pullback: Pt II (15:09)
Bread and butter pullback: Pt III (31:48)
Bread and butter pullback: Pt IV (30:16)
System R
Short-selling (25:53)
Wyckoff spring reversal (2:30) 
5-minute breakup test (8:01)