Long-and Short-term S&P 500 Outlook

At the same time last year, the S&P 500 was in the early stages of a 270-point drop and logged one of the worst Januaries in history.

On January 20, and February 11, the S&P was as low as 1,810. Headlines, such as the one below, sprouted up everywhere (talk about financial bloopers):

  • “Warning: The Stealth Bear Market is About to Show its Teeth” – MarketWatch
  • “Here Comes the Recession and Bear Market” – Forbes
  • “Marc Faber: Assets will Crash like Titanic” – Bloomberg
  • “Soros: It’s the 2008 Crisis all Over Again” – CNBC
  • “Gartman: It’s Definitely a Bear Market this Time” – CNBC
  • “The Bear Market in Stocks has Finally Arrived” – MarketWatch
  • “Market could Go from Bear to Worse” – TheStreet
  • What a difference a year makes.

The chart below plots the S&P 500 against six different investor sentiment gauges. Sentiment has gone from extremely bearish in January/February 2016 (green bar) to extremely bullish today.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Here is the elephant in the room: From a contrarian perspective, is investor sentiment bullish enough to cause a significant drop right now?

When viewed in isolation, the answer is: Yes. By some measures, today’s sentiment extremes rival extremes seen in late 2007 (December 31 Profit Radar Report includes a comparison between investor sentiment in 2007 and 2016).

We never rely on any one single indicator, and other indicators – which predicted this rally before it started – continue to point higher (our longer-term bullish indicators were discussed here: S&P 500 – Expect the ‘Abnormal’ – Comprehensive S&P 500 Analysis).

The S&P 500 has yet to reach the up side target published by the August 5 Profit Radar Report (see chart below).

There are times where stocks continue to climb despite sentiment extremes. Now may be such a time.

Short-term Outlook

The December 14 PRR stated that: “Yesterday’s high could be the end of wave 3 (perhaps a wave 3 within a larger wave 3), to be followed by a choppy wave 4 correction with much sideways action (sideways action following strong moves has certainly been a pattern in 2016).”

After three weeks of choppy trading, the market did what it does best. It fooled the crowd by briefly dropping below the 20-day SMA and double trend line support at 2,245.

This drop triggered another set of buy signals for the S&P 500 SPDR ETF (SPY) and Nasdaq QQQ ETF (QQQ), and the January 2 PRR stated that: “The S&P 500 broke below support at 2,245. This may just be a fakeout move. The DJIA, Russell 2000 and Nasdaq are at support. We will allow stocks to regain their footing and move higher from around current levels.”

The strongest part of this rally is behind us, but further gains are still likely. Instead of straight up, future gains will probably take the shape of ‘two steps forward, one step back.’

Continuous updates with actual buy/sell recommendation are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

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Post AAPL Earnings – What’s Next for the Nasdaq?

It’s been a remarkable couple of weeks for the Nasdaq, not just in terms of performance, also in terms of ‘market oddities.’

On Friday, the Nasdaq QQQ ETF literally jumped higher, propelled by Google’s 13% gain.

However, Google’s massive rally covered up internal Nasdaq weakness. On that day more Nasdaq-100 components were actually down than up.

New highs on negative breadth is a rare feat. Nevertheless, the Nasdaq managed to do the same thing again on Monday.

The Nasdaq Composite is made up of about 3,000 stocks (compared to 100 for the Nasdaq-100). On Monday, there were 940 more stocks down than up.

Here’s another breadth measure, illustrated visually via the chart below. The upper bars represent the PowerShares QQQ ETF, the lower graph the number of Nasdaq Composite stocks at new 52-week highs.

The number of stocks at new highs fell from 189 on Friday to 97 on Tuesday, a 49% drop.

My most recent Profit Radar Report highlighted lagging breadth and bearish divergences and warned of a pullback.

Regarding AAPL earnings, the Profit Radar Report said Sunday that: “AAPL is butting against minor resistance and AAPL seasonality shows some weakness in the middle of July. AAPL’s move is likely to be more subdued than GOOG.”

AAPL (Nasdaq: AAPL) dropped as much as 7% in post-earnings after market trading and gapped below support this morning. Click here for detailed AAPL analysis.

What’s next for the Nasdaq?

The bottom line, based on a number of indicators, is this: The potential for a nasty Nasdaq selloff exists, but another rally leg to new highs seems more likely. The green lines (around 111 and 106) should provide support for the QQQ. If they don’t, watch out.

A more detailed analysis for the S&P 500 is available here: S&P 500 Analysis

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

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Nasdaq QQQ ETF Breaks out of Bull Flag

The April 22 Profit Radar Report showed this chart of the Nasdaq-100 and stated:

There are similarities between AAPL and the Nasdaq-100, which is forming a potential bull flag. A break above 4,465 – 4,485 (corresponding level for QQQ = 109.10) could drive the Nasdaq-100 to next resistance around 4,600. Aggressive investors may buy QQQ with a break above 109.10.”

The bullish breakout materialized, but how legitimate is it?

 

Below is an update chart of the Nasdaq QQQ ETF.

  • The breakout occurred on elevated volume. Bullish.
  • There’s on open chart gap at 109.55, which will probably get filled.
  • There’s a long-term bearish RSI divergence. Potentially bearish.
  • RSI may be about to close above trend line resistance. Potentially bullish.
  • Next resistance at 111.50 – 112.20.
  • Ideal bull flag target is around 112.50.

The trend is up, but lagging breadth and the open chart gap suggest an eventual pullback is likely.

AAPL, the MVP of the Nasdaq and most important stock in the world, shows one of the most fascinating chart formations. More detail here: Fascinating AAPL Chart Formation Telegraphed Bullish Breakout

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

Fascinating AAPL Formation Telegraphed Bullish Breakout

The April 22 Profit Radar Report highlighting this fascination AAPL (Nasdaq: AAPL) formation with the following commentary:

AAPL, the most important stock in the world, hasn’t been able to nudge the S&P, Dow Jones or Nasdaq in either direction. That’s because AAPL is stuck in its own trading range/triangle. The consolidation pattern is similar to that of Q3 2014. AAPL closed at 128.62 today. This mini-breakout increases the odds of more upside.”

 

Below is an update AAPL chart. The next meaningful resistance cluster is around 140, but the open chart gap (and various breadth divergences) allows for a ‘digestive pullback’ at any time. In terms of Elliott Wave Theory, any new high could complete a 5-wave move and result in a larger-scale reversal.

AAPL’s pop also propelled the Nasdaq-100 and PowerShares QQQ ETF (Nasdaq: QQQ) out of a formation called a bull flag. More details here: Nasdaq QQQ ETF Break out of Bull Flag

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

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Update: Will the S&P 500 Roll Over Again?

I was wrong! I expected the S&P 500 to rally from 1,990 to 2,080 and roll over to new lows. The rally happened, the subsequent reversal did not (at least not yet). Will the S&P 500 roll over later? Here’s an updated S&P 500 forecast.

How quickly things change. Here’s the chart and forecast that now requires a full reevaluation:

February 1 Profit Radar Report: “Near-term support around 1,990 is becoming quite obvious. When support is too obvious, the market may want to fool investors with a seesaw. A drop below 1,990 followed by a reversal and rally towards 2,080 (green projection in chart below) is most likely” (the alternate red projection would only have come into play with sustained trade below 1,990).

The S&P briefly dropped below 1,990 and rallied to 2,080 … and beyond. In fact, there was a new all-time S&P 500 (NYSEArca: SPY) high today.

The new all-time high is in harmony with the longer-term forecast of the January 4 Profit Radar Report: “Based on the ‘secret sauce indicator’, we expect new all-time highs following correction lows” (for the benefit of paying subscribers, I replaced the name of the actual indicator with ‘secret sauce.’ More details about the reliable ‘secret sauce indicator’ is available here).

However, as implied by the original green projection, I expected the S&P 500 to roll over around 2,080 and drop below 1,980.9 (February 2 low) at the minimum. In fact, I would have preferred to see 1,900 for a great buying opportunity.

Obviously the S&P 500 did not roll over around 2,080, but do I still expect new lows?

New Lows?

Below is an updated version of the February 1 chart. The green circles mark bullish touch points. There were other telltale signs along the way hinting at more immediate bullish potential.

The February 6 article – Will New MidCap Highs Propel All Stocks Higher? – noted the new SPDR MidCap ETF (NYSEArca: MDY) all-time highs, the S&P 500 trend line breakout and solid internal market breadth.

The warning given was that: “There’s no room for tunnel vision. Dale Carnegie beautifully illustrated the cost of tunnel vision: ‘Here lies the body of William J., who died maintaining his right away. He was right, dead right as he sped along, but he’s just as dead as if he were wrong. Nobody wants to be William J.

There was also the Nasdaq QQQ ETF (Nasdaq: QQQ) breakout (February 10: Can the Nasdaq QQQ ETF Break out of a Bull Flag Pattern and Rally 10%?).

Will this be Another Extended Rally?

Some short-term indicators are overbought, but RSI confirmed the recent high and the new S&P all-time high is greeted with headlines such as:

  • Robert Shiller’s (depressing) advice for investors – CNBC
  • 7 danger signs of stocks’ coming bear market – MarketWatch

That’s not the kind of optimism indicative of a major top.

The new ATH essentially eliminates the immediate risk of new lows (below 1,980.9). A smaller correction is still possible, but the overall environment is changing towards ‘buy the dip’ … for now.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Can the Nasdaq QQQ ETF Break out of a Bull Flag Pattern and Rally 10%?

A bull flag is described as a consolidation period that interrupts a sharp, almost vertical rally. QQQ had a sharp rally from the October low and a pro-longed consolidation period thereafter. The classic bull flag breakout target projects a 10% rally.

The Nasdaq QQQ ETF (Nasdaq: QQQ) chart is simple, but packed with information.

QQQ has been consolidating for 2 ½ months. The consolidation range is defined by a parallel channel with a slant to the down side.

Channel resistance is at 104.  Resistance created by the January 23 and November 29 highs is at 104.58 and 105.25.

There’s also a Fibonacci projection level, going back to the October 2002 low, at 105.29.

I’ve read some articles that describe the channel consolidation as a bull flag.

What is a bull flag?

As the name implies, this pattern looks like a flag. A bull flag represents a digestive period after a sharp rise.

In a bull market, the flag is usually formed with a slight down trend and tends to separate two halves of a steep rally.

If this is indeed a bull flag, a breakout above 104 projects a target around 120.

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Is this a bull flag?

  • Duration: In their technical analysis books, authors Pring, Edwards and Magee state that flags can form for a period as short as 5 days or as long as 3 – 5 weeks. But a formation that lasts longer than 4 weeks should be treated with caution.

    This particular flag pattern is already 10 weeks old.

  • Trading volume: Trading volume should diminish appreciably and constantly during the pattern’s construction and continue to decline until prices break away from it.

    Trading activity dried up in February, but saw significant volume spikes early in the pattern.

In summary, the 10-week long QQQ consolidation pattern looks like a bull flag, but it does not meet the qualifications of a bull flag.

Nevertheless, certain measures of sentiment show above average pessimism for the Nasdaq QQQ ETF, which could support further up side.

Here is a bit more context: The SPDR S&P 500 ETF (NYSEArca: SPY) is gnawing on similar resistance, and the SPDR S&P MidCap 400 ETF (NYSEArca: MDY)  just broke to new all-time highs. The 104 – 106.25 QQQ range appears pretty significant for the next big move.

I’ve taken a pretty bold stand regarding the next S&P 500 move, and am watching the QQQ ETF carefully for clues.

My bold S&P 500 call is available here with the latest update posted here.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

The Amazon-Google-Nasdaq Mini Crash Explained

It’s been a bad couple of days for the stock market in general and technology stocks in particular. A gradual decline has turned into the quickest loss since 2012. Here’s what predicted this mini meltdown weeks in advance.

Gradualism is a slow change, and changes in slow stages are less shocking than sudden changes.

Case in point, today’s and Friday’s big Nasdaq drop is getting a lot more attention than last month’s slow Nasdaq deterioration.

The gradual stair-step lower has now accelerated into a 6%+ correction for the Nasdaq QQQ ETF (Nasdaq: QQQ).

But the warning signs started as early as January. On January 5, the Profit Radar Report featured this warning commentary:

Trivia: Which high-flying tech leader has a P/E ratio of 1,403? Tip: This stock is the fourth biggest component of the Nasdaq-100. Answer: Amazon (AMZN). Amazon founder Jeff Bezos is a true visionary and Amazon is working on amazing technology, but ultimately earnings are more important than pure vision. Near-term support is around 380. A close below 380 would open the door for much lower targets.”

The February 2 Profit Radar Report included the following update on Amazon and a shocking new warning for Google.

Here’s the Amazon update: “Amazon gapped below support at 380 on Friday, unlocking a potential target around 340 or 320. Resistance is not at 380, which would be a low-risk entry to go short for aggressive investors.”

Here’s the shocking (at the time) February 2 Google warning:

Better than expected Google earnings propelled the stock to trend line resistance. This may be the end of the rope for Google and an opportunity to leg into a strategy that profits from lower prices (short GOOG, buy GOOG puts or sell GOOG calls). Support is around 1090.

Fishing for tops of high-flying tech companies is risky business, but can pay off big (i.e. short AAPL, see recommendation in Sep. 12, 2012 Profit Radar Report). GOOG is over-loved (the timing to issue lower-priced shares could be indicative of a top), cycles point lower and RSI is lagging prices. Nevertheless, strong momentum can overwrite bearish forces for a while. Legging into short positions at various prices reduces the risk of catching a falling knife.”

The recommended Amazon and Google put options are up 100 – 300%, but more importantly Amazon.com (Nasdaq: AMZN) and Google Inc. (Nasdaq: GOOGL) account for over 10% of the Nasdaq-100 and therefore foreshadowed a period of Nasdaq underperformance.

A March 31 examination of the Nasdaq VIX (VXN) compared to the S&P 500 VIX (VIX) showed increased fear about Nasdaq stocks (see chart below published on March 31).

This fear of holding the hottest tech names became more obvious in early April when ‘old tech’ names like Microsoft, Oracle, CSCO and Intel smoked ‘new hot tech’ names like Facebook, Tesla, Netflix and Priceline (click here for April 2 article: “Why ‘Hot New Tech’ is Getting Crushed by ‘Old Tech’).

Although it may seem like it, the Profit Radar Report is not a stock picking service. The Profit Radar Report’s focus is forecasting movements for the S&P 500 (and at times Nasdaq and Dow Jones).

But sometimes certain stocks get too ‘bubblelicious’ to ignore (and serve as early warning indicators for broad indexes).

As far as the S&P 500 is concerned, one deceptively simple chart that warned of an S&P 500 top around 1,900 was published here on April 1 (important detail: The chart also highlights key support).

S&P 500 Stuck Between Triple Top and Triple Bottom

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Technical Support Buoys Nasdaq … For Now

Friday’s market action was unusual as stocks didn’t rally into the close to cap the week with a happy end. Despite a rough week for stocks though, the Nasdaq Indexes and Nasdaq ETF stayed above important short-term technical support.

On Friday I tweeted a picture of an important technical support shelf for the Nasdaq-100.

Here’s a closer look at important near-term support for the Nasdaq Composite, Nasdaq-100, and Nasdaq QQQ ETF (Nasdaq: QQQ).

Nasdaq-100 Support

The chart shows support around the January 22 high (which is also the March 3 low) and the October 2000 monthly candle high (lower green line).

Nasdaq QQQ ETF

Technical support for the Nasdaq QQQ ETF is around 88.90.

Nasdaq Composite

The Nasdaq Composite found support exactly at the January 22 high (which is also the March 3 low).

The 78.6% Fibonacci retracement of all points lost from 2000 to 2002 is at 4,271.

Rising trend channel support is at 4,222 and the 50-day SMA at 4,207.

We don’t draw those support levels, the market does (we just connect the dots).

In addition to the subtle Nasdaq clues, there’s been one ‘tip off indicator’ that’s kept investors on the right side of the trade, and it’s not one often talked about:

Leading Indicator: What the Yen Carry Trade Predicts for Stocks

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

What’s the Nasdaq’s Upside Target?

Despite a dismal start into 2014, the Nasdaq-100 has taken out its January high and is trading at the highest level in 14 years. Is the sky the limit? Here are two price targets that may act as resistance and keep a lid on the advance.

The Nasdaq-100 just rallied to a new 14-year high and the sky seems the limit. But what’s a more realistic limit or target?

Here are some developments worth considering:

The first chart shows the Nasadaq-100 Index, better known by its ETF reflection, the Nasdaq QQQ ETF (Nasdaq: QQQ).

The Nasdaq-100 initially stalled at the first red line, which corresponds to the October 2000 monthly high (3,614).

The Nasdaq-100 closed above 3,614 this week. Technically, the sky is clear to the next important resistance level, which is the 78.6% Fibonacci retracement of the points lost from 2000 – 2000, located at 3,956.

The Nasdaq Composite (Nasdaq: ^IXIC) is already within striking distance of its 78.6% Fibonacci retracement at 4,246.55.

As the two charts illustrate, only the Nasdaq-100 rallied to new highs this week. The broader Nasdaq Composite has not yet taken out its January high watermark.

This minor bearish divergence could weigh down the near-term performance. Even if the Nasdaq Composite continues higher, it will still have to deal with Fibonacci resistance at 4,246.55.

The U.S. stock market universe extends beyond the two Nasdaq indexes.

Although the Nasdaq charts suggest at least marginal gains, there’s still reason to be suspicious of this powerful bounce.

The February 5 Profit Radar Report featured this projection (yellow lines) for the S&P 500 (SNP: ^GSPC).

The S&P 500 chart projection provided a visual of the February 3 forecast: “Even though today was a rare 90% down day (90% of all stocks traded closed lower) there was a bullish RSI divergence. This suggests that selling pressure is subsiding. Ideally, the market will deliver another minor up/down wiggle before staging a larger bounce.”

The proposed S&P 500 bounce has nearly reached the projected target, so risk is increasing.

For what to expect next (short-term and long-term) and the key line in the sand between bearish risk and bullish opportunity refer to the Profit Radar Report. A detailed 2013 performance report of the Profit Radar Report and a 2014 forecast preview are available here:

Not Your Average 2013 Performance Report

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

AMZN Slices Below Key Support – With P/E of 1,403 Downside Risk is Enormous

Investors buy Amazon for its founder’s vision and ingenuity, not because the company is a cash cow. The problem with a ‘vision based investment,’ and a four-digit P/E ratio is immense down side risk once momentum wanes.

Jeff Bezos, Amazon’s founder, is an incredible visionary.

Amazon.com Inc (Nasdaq:AMZN) operates on razor thin profit margins, so investors buying AMZN invest in Bezos’ vision, not a cash cow.

A look at AMZN’s chart (up until January 22) shows that Bezos’ vision trades at a premium. That premium made Amazon the fourth biggest component of the Nasdaq-100 and Nasdaq QQQ ETF (Nasdaq: QQQ).

Amazon also ranks #21 on the list of S&P 500 and SPDR S&P 500 ETF (NYSEArca: SPY) components.

The January 5 Profit Radar Report featured this little piece of financial trivia:

Which high-flying tech leader has a P/E ratio of 1,403? Tip: This stock is the fourth biggest component of the Nasdaq-100. Answer: Amazon (AMZN). Amazon founder Jeff Bezos is a true visionary and Amazon is working on amazing technology, but ultimately earnings are more important than pure vision.”

Featured along with the trivia was the first chart below and this warning:

Near-term support is around 380. A close below 380 would open the door for much lower targets.”

I’d like to point out that the Profit Radar Report doesn’t customarily feature single stock analysis (most analysis is based on the S&P 500), but every once in a while it looks at stocks too ‘bubbleicious’ to ignore.

Those stocks included Apple (September 12, 2012 Profit Radar Report) and Tesla (August 31, 2013 Profit Radar Report) and now Amazon (and one other high-flying stock).

The second chart zooms in on Amazon’s more recent performance.

AMZN gapped below 380 last Friday and lost as much as 15% since January 22.

Based on Amazon’s sky-high P/E ratio, the down side risk is quite enormous. The key level for Amazon shorts is 380.

The Profit Radar Report identified one other high-flying tech name that looks too ‘bubbleicious’ to ignore. Unlike AMZN, it still trades within a few percent of its all-time high. It also just reached its up side target and sports a lot of down side risk.

Sunday’s special edition of the Profit Radar Report profiled this short-term trade along with a longer-term forecast for the S&P 500 (PS: If you are thinking about signing up for the Profit Radar Report, keep in mind that it is not a stock picking service).

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.