At least 29 reasons to be bullish

Exhibitions of powerful price momentum are rare. Since the market bottom in 2002, there have been eight occasions when the percentage of S&P 500 above their 50 dma has surged from below 15% to over 90% in a brief period. That latest episode occurred when stock prices soared off the bottom in October 2023. These price surges were usually resolved in either a short-term consolidation or setback, but the S&P 500 was invariably higher a year later with a 100% success rate.


I conducted a bottom-up scan of stock charts to look for technical uptrends and strong breakout formations. The scan isn’t meant to create a complete list of stocks with bullish technical outlooks.


My evaluation framework is based on two components: the simple analysis of a weekly chart of the stock in the top panel, and the relative performance of the stock against the S&P 500 in the bottom panel. U chose the weekly chart as a way of filtering out the noise from daily price movements and better show the intermediate price trend. Ideally, both should be either in uptrends or breaking out on both an absolute and relative basis.


I found at least 29 charts with bullish technical patterns, none of which should be considered to be buy recommendations without further individual fundamental due diligence. Taken together, I came away with a stronger conviction of intermediate bullishness for the stock market, sector and industries. As well, this bottom-up analysis also pointed to bullish macro conclusions about the economy.



The Magnificent Seven

No bottom-up technical scan of chart patterns would be complete without the analysis of the Magnificent Seven. I found that most of these stocks exhibited bullish patterns.
The star of the Magnificent Seven has to be NVIDIA (NVDA), which is in a well-defined uptrend and broke out to fresh all-time highs as investors have bid up the share price over the promise of AI-related demand for the company’s chips. As well, the stock staged double relative breakouts to new relative highs.


Close behind NVIDIA is Microsoft (MSFT), which is in both an absolute and relative uptrend.


While it is not in an uptrend, Meta Platforms (META) is a stock that’s exhibiting what will be a recognizable breakout from a long multi-month base, both on an absolute and relative basis.


The chart pattern of (AMZN) is less bullish, but nevertheless promising. The stock staged an upside breakout from a long base, but we have seen no relative breakout just yet.


Alphabet (GOOG, GOOGL) hasn’t staged upside breakouts just yet, but it is also testing resistance while exhibiting the now familiar saucer-shaped base.


One laggard within the Magnificent Seven is Apple (AAPL). The stock staged an upside absolute breakout, but it’s trading under a key relative resistance level.


The worst chart of Magnificent Seven stocks is Tesla (TSLA), which struggled because of concerns over its China exposure.

The latest BoA Global Manager Survey showed that institutions believe long Magnificent Seven is the most crowded trade. While the trade may be crowded, megacap growth stocks may have further potential to run. The normalized relative returns of the NASDAQ 100 (black line) is only in the middle of its 12-month range. I interpret this to mean that AI-related excitement could drive these stocks much further than many people might expect.



Technology winners

In general, the technical scan has thrown off numerous bullish patterns in the technology sector. In particular, the semiconductor stocks have been standouts, starting with Broadcom (AVGO), which is in a well-defined absolute and relative uptrend.


Here is Lam Research (LRCX), which staged upside absolute and relative breakouts of saucer-shaped bases.


An honourable mention goes to Advanced Micro Devices (AMD), whose chart is not shown. AMD is testing absolute and relative resistance levels out of multi-month bases.

Nutanix (NTNX) also staged an absolute and relative breakout out of multi-month bases.


Qualys (QLYS) staged a definitive upside breakout on an absolute basis. However, it has pulled back from its relative breakout level and it’s re-testing a key resistance level (bottom panel).


Other technology stocks of note include (CRM), which staged an absolute breakout, but remains below its relative breakout level.


Guidewire Software (GWRE), has a similar technical pattern of upside breakouts through absolute and relative resistance levels.


Shopify (SHOP) has also staged absolute and relative breakouts from long bases.


Lastly, here is Affirm Holdings (AFRM) within the technology sector, which staged an absolute breakout, but remains below its relative breakout level.



A strong consumer

I also found numerous technically strong stock patterns in the consumer discretionary sector, which is the sign of a strong consumer. In particular, selected apparel and footwear stocks have gone bonkers.

Abercrombie & Fitch (ANF) is in a well-defined absolute and relative uptrend.


Decker Outdoor (DECK) is exhibiting a similar absolute and relative uptrend.


An honourable mention whose chart is not shown goes to lululemon (LULU), which staged an absolute upside breakout through resistance but pulled back.

Booking Holdings (BKNG), a travel stock, is also in an absolute and relative uptrend.


Expedia (EXPE) has staged upside breakouts on an absolute and relative bases out of long bases.


These are all signs of a healthy consumer. Costco (COST) has staged an upside and relative breakout to an all-time high. While Walmart (WMT), whose chart is not shown, did breakout on an absolute basis, its relative performance is not as strong.



Important cyclical winners

My technical scan also revealed strength in important cyclicals such as housing. DR Horton (DHI), a homebuilding stock, is in an absolute and relative uptrend.


A similar price pattern can be seen in Toll Brothers (TOL), though the stock has pulled back and consolidated its gains in the past few weeks.


Price strength isn’t just confined to homebuilding stocks. Boise Cascade (BCC), a supplier of building products, has also broken out to all-time highs on an absolute and relative basis.


TopBuild (BLD) is also exhibiting a similar pattern of strong absolute and relative breakouts.


Among the cyclically sensitive industrial stocks, General Electric (GE) staged upside absolute and relative breakouts out of multi-month bases. The chart pattern that differs industrials from other bullish patterns is the breakout occurred in early 2023, which was earlier than the others that I highlighted in this publication.


Caterpillar (CAT), another globally sensitive industrial stock, staged a similar upside in early 2023, but chopped sideways since the breakout. This is nevertheless a constructive pattern.


Fastenal (FAST) is a useful industrial bellwether as it’s a distributor of industrial and construction supplies. The stock broke out of a long base in late 2023 and soared last week after its earnings report.


Among the banks, which are also cyclically sensitive, JPMorgan Chase (JPM) is a standout. It staged an absolute breakout in late 2023 out of multi-month bases to an all-time high, though the relative breakout, which occurred at the same time, exhibited less strength.


By contrast, most of the bank stocks skidded badly at the time of the Silicon Valley Bank debacle, but retained their support levels in December 2023.



Special situations

My technical scan is not meant to be comprehensive and I apologize if I missed your favourite stock. It was meant to be a bottom-up technical review to highlight sector and industry strength. With that caveat in mind, I would be remiss if I didn’t point out the strength in a couple of special situations in outlier industries.


The first is Eli Lilly (LLY), whose stock price has gone from strength to more strength over investor excitement about the promise of weight loss drugs.


The absence of healthcare stocks in my technical scan was a bit of a puzzle in light of the sector’s constructive relative bottom pattern and improving relative breadth (bottom two panels). However, a bottom-up review of the technical pattern of the heavyweights in the sector shows that much of the sector’s strength can be attributed to LLY.


The other special situation stock to highlight is the strength in uranium producer Cameco (CCJ), which is in strong absolute and relative uptrends because of renewed enthusiasm over nuclear power. The strength in CCJ is occurring in spite of the weakness in materials stocks, which is a reminder that the specific fundamentals of any company can overwhelm the price factors that influence its sector and industry.


In conclusion, a bottom-up driven scan of stock charts shows numerous stocks with bullish technical patterns consisting of uptrends or breakouts from multi-month bases with strong potential upsides. Bullish patterns are broadly based, primarily concentrated in technology and cyclicals, which argue for a continuation of the AI-related bull and an economic rebound. This bottom-up analysis also pointed to bullish macro conclusions about the economy.