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Pattern Profits newsletter - Issue #1

Pattern Profits
Pattern Profits
Welcome to the first edition of the Pattern Profits newsletter.

Market Pulse
Distribution Count: 4 on Nasdaq and S&P
Cycle Count: Day 38 (Daily cycle low in progress)
Market exposure rating: 3 (0 to 8 scale)
The put/call ratio is moving in the right direction for the bull camp as it marches closer to fear levels. Additional downside should push this indicator into an extreme fear reading above 1.0. As a contrarian indicator, this sets up well for a short term bottom in the averages as we watch for the daily cycle low to complete.
New highs minus new lows staying positive but deteriorating since the calendar rolled over into September. Seasonality and history suggest September may be a difficult month. So far, that’s holding to form.
Aggregate breadth is rolling back over after signs of improvement following the August washout. While this indicator didn’t make it back above the zero line (red), breadth had been improving into the start of September. A rising line acts as a tailwind for long positions, while a declining line acts as a headwind. Last week’s market weakness as the daily cycle tries to find its low certainly contributing to the reversal and deteriorating breadth here.
Despite recent weakness, the overbought/oversold indicator remains neutral. Having just crossed the zero line and coming off recent overbought levels, this indicator still has room to run in either direction though the momentum is clearly lower. When combined with the indicators we discussed above, we can see there’s continued room for additional downside before tagging extreme oversold levels (green line).
Lastly, we have growth vs value. When the line is rising, growth stocks are outperforming value stocks. When the line is declining, value stocks are taking the lead over growth stocks. After a solid run from mid-August through the start of September for growth, this relationship has also rolled back over.
Focus List Top 30
Scanner Heat
Heavy Options Activity
Top Setups
As noted above, the market is in a precarious spot in the short term with indicators currently pointing lower. In addition, monthly options expiration is this Friday which tends to increase volatility.
Chart courtesy of TrendSpider
Chart courtesy of TrendSpider
RBLX sets up very well into next week following back to back pocket pivots. Price wasn’t able to close above the descending trendline but any strength early next week should clear that level with eyes on the $90.95 pivot above. A wick play here above Friday’s close of $87.88 would also be in play on a gap up open. Depending on timeframe, risk can be managed using Friday’s low and the AVWAP from off the high at $84.67 or using the 10/20MA cloud roughly 4% below. $94.39 and $103.87 logical targets above. Of note, heavy call activity Thursday was rewarded as the $87 strike closed in the money.
Chart courtesy of TrendSpider
Chart courtesy of TrendSpider
OSUR hit the pocket pivot scan, as well as the full timeframe continuity scan after a strong performance on Friday and is now pushing up against a longer term trendline dating back to February highs and tagged several times since. The volume pattern here suggests it may be ready to push through to the upside. OSUR presents with 3 consecutive quarters of accelerating revenue growth (+27%, +85%, +97%) with estimates for annual EPS growth of +82%. On strength through the descending trendline, risk can be managed with the power of 3 moving averages below as it has a history of responding well to the 10/20MA cloud once it gets moving.
Chart courtesy of TrendSpider
Chart courtesy of TrendSpider
NTLA has been highlighted as a strong power earnings gap (PEG) name and now hits the high tight flag scan. Setting up a VCP pattern with price holding above AVWAP from the PEG, risk can easily managed benched against the 50/65MA cloud and the ascending trendline below. Price has struggled to push through the $178 level, but sets up well if Friday’s inside day should come out to the upside. It may provide an early entry opportunity for a breakout above. $165.22 the trigger on the inside day.
Chart courtesy of TrendSpider
Chart courtesy of TrendSpider
AFRM with another gap, this time on a power earnings move. Note how 10ma cloud (green) caught price after AVWAP failure before the big move on Friday. As we often do, watch Friday’s high to get taken out ($126.46) if buyers come in aggressive again early next week. We will also have an AVWAP attached to the PEG come Monday for managing risk. AFRM well worth keeping an eye on early next week.
Top Setups Video (New Trader Edition)
Top Setups 9/13
Top Setups 9/13
Economic Reports for 9/14
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Smart Trading Software by TrendSpider | Charts - Automation - Technical Analysis - Price Alerts - Market Scanner - Backtesting System
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The content presented is for informational and educational purposes only. Nothing contained in this newsletter should be construed as financial advice. Please do your own due diligence or contact a licensed financial advisor as participating in the financial markets involves risk.
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