after a few days of selling action on higher volume.
Yesterday’s rally put both the S&P 500 and NASDAQ back above their rising 10-day moving averages. But the next question is do we break out to new highs or stall at the prior high and consolidate a bit more? The daily chart of the NASDAQ below shows typical pullback action:
The PowerShares Dynamic Food & Beverage ETF (NYSEARCA:PBJ) has formed a bullish consolidation just below its all-time high during the past five months. The 40-week moving average remains in a clear uptrend, and the 10-week MA has been trending higher as well throughout much of the base:
Notice how the price action has tightened up over the past few weeks, just above the 10-week moving average and high of the consolidation. This contraction in volatility is what we look for in a base, as it often leads to a solid breakout.
We are adding $PBJ to today’s Wagner Daily watchlist as a potential buy entry
This article is brought to you courtesy of Morpheus Trading, LLC.