{"id":8246,"date":"2021-02-23T09:00:00","date_gmt":"2021-02-23T14:00:00","guid":{"rendered":"https:\/\/morpheustrading.com\/blog\/?p=8246"},"modified":"2022-04-06T15:04:54","modified_gmt":"2022-04-06T19:04:54","slug":"nasdaq-selloff-feb-2021","status":"publish","type":"post","link":"https:\/\/morpheustrading.com\/blog\/nasdaq-selloff-feb-2021\/","title":{"rendered":"Nasdaq Selloff: Why It May Now Be Time to Patiently Sit on the Sidelines"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-large wp-image-8248\" src=\"https:\/\/new.morpheustrading.com\/blog\/wp-content\/uploads\/2021\/03\/AdobeStock_282223497_1_25-1024x683.jpeg\" alt=\"Patience pays in trading\" width=\"640\" height=\"427\" title=\"\" srcset=\"https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2021\/03\/AdobeStock_282223497_1_25-1024x683.jpeg 1024w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2021\/03\/AdobeStock_282223497_1_25-300x200.jpeg 300w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2021\/03\/AdobeStock_282223497_1_25-110x73.jpeg 110w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2021\/03\/AdobeStock_282223497_1_25-768x512.jpeg 768w, https:\/\/morpheustrading.com\/blog\/wp-content\/uploads\/2021\/03\/AdobeStock_282223497_1_25-1536x1024.jpeg 1536w\" sizes=\"auto, (max-width: 640px) 100vw, 640px\" \/><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">TABLE OF CONTENTS<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/morpheustrading.com\/blog\/nasdaq-selloff-feb-2021\/#Our_market_timing_model_has_a_19-year_history_of_keeping_us_out_of_harms_way_when_stocks_suddenly_reverse_Heres_what_the_model_is_telling_us_about_the_current_state_of_the_Nasdaq\" >Our market timing model has a 19-year history of keeping us out of harm\u2019s way when stocks suddenly reverse. Here\u2019s what the model is telling us about the current state of the Nasdaq.<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/morpheustrading.com\/blog\/nasdaq-selloff-feb-2021\/#Proven_power_of_the_20-day_EMA\" >Proven power of the 20-day EMA<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/morpheustrading.com\/blog\/nasdaq-selloff-feb-2021\/#3_strikes_Time_to_sit_on_the_sidelines\" >3 strikes? Time to sit on the sidelines<\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Our_market_timing_model_has_a_19-year_history_of_keeping_us_out_of_harms_way_when_stocks_suddenly_reverse_Heres_what_the_model_is_telling_us_about_the_current_state_of_the_Nasdaq\"><\/span>Our market timing model has a 19-year history of keeping us out of harm\u2019s way when stocks suddenly reverse. Here\u2019s what the model is telling us about the current state of the Nasdaq.<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Our <a href=\"https:\/\/morpheustrading.com\/best-swing-trading-strategy\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"stock trading strategy (opens in a new tab)\">stock trading strategy<\/a> is based on capturing moves of 20-40% (or more) in high relative strength growth stocks in a clear uptrend.<\/p>\n<p>We also like to see the major indices should in a clear uptrend, which puts the wind on our back.<\/p>\n<p>With Monday\u2019s (February 22) close below the 20-day exponential moving average in both the Nasdaq Composite ($COMPX) and S&amp;P Midcap Index ($MDY), the dominant market uptrend is now in danger of reversing.<\/p>\n<p>A closing price below Monday\u2019s low in the Nasdaq Composite would confirm the break of the 20-day EMA, and increase the odds of lower to sideways price action during the next few weeks.<\/p>\n<p><em>Continue reading<\/em> to discover why now may be the perfect time to shift out of the Nasdaq and protect your hard-earned profits.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Proven_power_of_the_20-day_EMA\"><\/span>Proven power of the 20-day EMA<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>As we have seen in the past, there could be a false break of Monday\u2019s low that leads to a quick reversal back above the 20-day EMA. Such a move would negate the sell signal.<\/p>\n<p>No indicator is perfect, but the break of the 20-day EMA is a simple and reliable way to let us know when the wind is no longer at our back.<\/p>\n<p>Prior to now, there have been two previous tests of the 20-day EMA this year.<\/p>\n<p>On the chart below, notice how the 20-day EMA (beige line) perfectly acted as support to keep the uptrend intact:<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2020\/210223IXIC.png\" alt=\"\" data-recalc-dims=\"1\" title=\"\"><\/figure>\n<p>When doing broad market analysis, it\u2019s also important to look at the longer-term <em>weekly<\/em> chart time frame to remove the \u201cnoise\u201d from the shorter-term charts.<\/p>\n<p>On the weekly chart below, notice the Nasdaq is coming into support of its 10-week moving average.<\/p>\n<p>A few weeks of base building near current prices (consolidation) would be ideal.<\/p>\n<p>Notice the Nasdaq Composite has not touched the 10-week MA since November 2020:<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2020\/210223NAZ2.png\" alt=\"\" title=\"\"><\/figure>\n<p>Price action in leading stocks has definitely been ugly in recent days, but we have actually been seeing sector rotation out of tech leadership and into lagging industry groups.<\/p>\n<p>Notice how the blue-chip Dow Jones Industrial Average ($DJI) actually closed <em>positive<\/em> on Monday with a bullish reversal candlestick:<\/p>\n<figure class=\"wp-block-image\"><img decoding=\"async\" src=\"https:\/\/www.morpheustrading.com\/~rick\/\/charts\/2020\/210223DIA.png\" alt=\"\" title=\"\"><\/figure>\n<h3><span class=\"ez-toc-section\" id=\"3_strikes_Time_to_sit_on_the_sidelines\"><\/span>3 strikes? Time to sit on the sidelines<span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>When determining the health of the market, we first start with the price and volume action in current open positions and <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"leading growth stocks (opens in a new tab)\">leading growth stocks<\/a>.<\/p>\n<p>We then move to the major indices.<\/p>\n<p>When we get three sell signals (three strikes), we immediately tighten stops on existing positions and avoid new buy entries until conditions improve to generate a new buy signal in our proprietary <a href=\"https:\/\/new.morpheustrading.com\/blog\/market-timing-system\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"market timing model (opens in a new tab)\">market timing model<\/a>.<\/p>\n<p>Currently, we have:<\/p>\n<ul>\n<li><em>Strike 1 \u2013 <\/em>New buy entries in our <em><a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Wagner Daily (opens in a new tab)\">Wagner Daily<\/a><\/em> model portfolio have failed to impress with substantial gains.<\/li>\n<li><em>Strike 2 \u2013<\/em> Top growth stocks have struggled the past few weeks, with little to no follow through on breakout attempts (including failed breakouts).<\/li>\n<li><em>Strike 3? \u2013<\/em> If the Nasdaq Composite closes below its 20-day EMA, the index is no longer in a clear uptrend.<\/li>\n<\/ul>\n<p>In today\u2019s <a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"swing trading report (opens in a new tab)\">swing trading report<\/a>, we notified subscribers that we are now shifting to <em>cash<\/em> by avoiding new trade entries and greatly tightening stops on the few remaining positions.<\/p>\n<p><em>CASH is always a valid position\u2013<\/em>we are quite content to wait on the sidelines and protect our massive gains of recent months.<\/p>\n<p>As history has proven over the years, our rule-based market timing model does a fantastic job of quickly and automatically getting us out of harm\u2019s way when stocks suddenly reverse.<\/p>\n<p>To learn more, press <a href=\"https:\/\/new.morpheustrading.com\/blog\/when-to-buy-stocks-again\/\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"here (opens in a new tab)\">here<\/a> to see how we preserved gains and avoided massive losses when the major indices plunged sharply lower in late February 2020 (start of the coronavirus sell-off).<\/p>\n<p><em><strong><a href=\"https:\/\/morpheustrading.com\/services\/swing-trade-alerts\" target=\"_blank\" rel=\"noreferrer noopener\" aria-label=\"Sign up now (opens in a new tab)\">Sign up now<\/a><\/strong>&nbsp;for your Wagner Daily subscription to be instantly alerted when our market timing model tells us it\u2019s the right time to start buying leading growth stocks again.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Our market timing model has a 19-year history of keeping us out of harm\u2019s way when stocks suddenly reverse. Here\u2019s what the model is telling us about the current state of the Nasdaq. Our stock trading strategy is based on capturing moves of 20-40% (or more) in high relative strength growth stocks in a clear [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[758,754,756],"class_list":["post-8246","post","type-post","status-publish","format-standard","hentry","category-stock-trading-strategy","tag-market-timing","tag-nasdaq","tag-selloff"],"_links":{"self":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/8246","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/comments?post=8246"}],"version-history":[{"count":3,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/8246\/revisions"}],"predecessor-version":[{"id":11144,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/posts\/8246\/revisions\/11144"}],"wp:attachment":[{"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/media?parent=8246"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/categories?post=8246"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/morpheustrading.com\/blog\/wp-json\/wp\/v2\/tags?post=8246"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}