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Meta, Baker Hughes, emerging markets: What the charts show

The Nasdaq Composite (^IXIC) had the worst month of the year in September but there are signs that point to a potentially rally. Thanks to the August PCE report, some stocks have begun to claw back their losses. Alissa Coram, Investor’s Business Daily Executive Editor, joins Yahoo Finance's Jared Blikre to share their insights on the market and discuss some stand out stocks including Meta (META) and Baker Hughes Company (BKR), as well as Emerging markets ETF (EEM) and the performance of the U.S Dollar (DX-Y.NYB)

Coram points out that when the Nasdaq broke its August lows, it shook out the "weak holders" and set the stage for a rally attempt. However, it's important to look for a "confirmation of a change in trends." Coram says she is looking specifically for a "follow through" day to confirm the move.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video transcript

BRAD SMITH: Stocks are clawing back some of September's losses, as investors look ahead to the fourth quarter. Here to help break down all the market action, we've got Yahoo Finance's Jared Blikre with a special guest. Hey, Jared.

JARED BLIKRE: Hi there. We have Alissa Coram today from Investor's Business Daily. And we're talking about the NASDAQ. Now, Alissa, we are looking at a downtrend. This is over the last three months in the NASDAQ. We just had the worst month of the year in September. Wondering what you're seeing from a technical point of view.

ALISSA CORAM: So, the recent undercut of the mid-August low, I think that's actually really constructive. Of course, no one wants to see the market go down. We want to be making money. But that actually shakes out the weak holders.

So we are now in the early stages of a rally attempt on day three. But we don't want to try to just call a bottom, right? We don't want to pick a bottom that can be risky. We want to see a confirmation of a change in trend.

So what I'm looking for is what we call a follow-through day. So that happens on at least day four of a rally attempt-- the earliest. It could take a couple of weeks or months to play out. But of course, we want the sooner, the better.

JARED BLIKRE: And let me--

ALISSA CORAM: We're on day three now.

JARED BLIKRE: We had a couple of follow-through days earlier in the year. One of these was in early January. It worked out. The other was in late August. That didn't work out because as you just said, we undercut those lows.


JARED BLIKRE: How does an investor use these to help get into the market and also avoid some of the bad-- the false positives?

ALISSA CORAM: Yeah, and we had one in around late May as well. So I would say the signal-- no one has a crystal ball, right? But it's putting the odds in your favor. So, if you can get a confirmation that institutions are coming back into the market, that's what we're looking for.

We're looking for a couple of up days in a row, accompanied by increasing volume that signals, OK, the institutions are moving back in, maybe the waters are a little safer. Not every big rally has that really early on. Some of them do fail, but every big rally does start with one of these follow-through days.

JARED BLIKRE: All right. And just to be clear, we got to wait till day four. So it's not even possible to have one today. And yesterday was not one just yet.

ALISSA CORAM: Not quite yet. Almost.

JARED BLIKRE: All right. We're going to talk about Meta here. It looks like a bunch of sideways on this chart. But let's put a year to date. Because this is a stock that has been on fire given the market cap. You can't help but notice this.

ALISSA CORAM: Exactly. I think this is arguably the best looking "Magnificent Seven" stock. If you track relative performance versus the S&P 500, that outperformance is definitely there. And with a lot of tech stocks that have been selling off since July, this one has held up really, really well.

And now that volatility is contracting as of late. It's having a good week this week, trading right around 300 or so, actually using that as a launching pad, now getting above that level. So we had a little bit of a shakeout. Now we're moving up.

You could draw a trend line from the highs. The declining tops trend line potentially actionable here, but we don't have that market confirmation signal just yet. So be careful. You always want to use a stop loss.

JARED BLIKRE: All right. Very important there. Always manage your risk. I also want to move on to another ticker-- Baker Hughes. This is a year to date. Up 20%, oil services. What are you seeing in the technicals?

ALISSA CORAM: So a little different. I favor tech stocks. But you can't deny when something like--

JARED BLIKRE: Energy has been on fire.

ALISSA CORAM: Yeah, it's been on fire. It's been outperforming. So whereas a lot of-- again, the tech stocks have had a tough last couple of months. Energy has really come into focus. And this one's been trading nicely.

It's big, it's liquid. It has strong fundamentals. Last quarter earnings, super strong. So pulling back here today. Of course, we know the energy stocks tied to the underlying commodity there.

But this could have some potential. I think on the downside, you want to be looking at that 34, 35 level for some support, 38 on the upside if it can get above that recent high. I think it could have up until 42 to where the next potential resistance level would be.

JARED BLIKRE: All right, there you go. Also, I want to talk about emerging markets. We don't necessarily talk about this all the time, especially in terms of technicals. But I'm looking at EEM. This is the iShares MSCI Emerging Markets ETF.

This is heavily, heavily weighted toward China. So I'll just throw out that caveat. But when you take a look over the last three years, you can clearly see it's stuck in the bottom end of its range still. Just wondering if you have any thoughts on the technicals in this particular ticker.

ALISSA CORAM: Yeah, I mean, you said it, Jared. Looks like it's stuck in the doldrums here, moving sideways. So hey, at least it has a bottom. It's not still going down. So that's a start.

But if you're looking at relative performance versus the S&P, this is underperforming. So I say you might as well buy SPY unless it can get out of this consolidation area and start outperforming the S&P. Because the goal at the end of the day for active traders, we want to be outperforming the broad market, not underperforming.

JARED BLIKRE: Yes. Well, I'll say this, too. This is a max chart. This goes back about 20 years. This is really a non-trending asset here. I could make the argument that this has been going sideways for quite a long time.

Alissa, I do have a little bit of time. I've got less than a minute here. Just wondering what you're thinking about the US Dollar Index. This is a max chart. But year to date, it's been pretty strong. Does this affect your thinking at all when you're entering trades in the tech sphere, for instance?

ALISSA CORAM: Absolutely. I think if you're looking at the dollar and interest rates, there's that inverse correlation that you're seeing. So as long as we're seeing a strong dollar, strong interest rates, that is going to be a wet blanket on the equity market. So, we want to see a little bit of relief there.

It's definitely a factor to consider. But at the end of the day, it's price that pays. So if you're seeing a strong stock like Meta outperforming the S&P 500, you may want to take a nibble. But again, manage that risk.

JARED BLIKRE: I love it when people quote Brian Shannon. "Only price pays." Alissa Coram, thank you very much.