Here’s what you should know about this pullback…

And where I’m focusing trade-wise.

Remember last Friday when we talked? I called that while we initially saw a downside trigger in the transports, because the indexes hadn’t fully triggered, it was still just a slight pullback? Additionally, on Friday, Phoenix showed us how several key names (MSFT, AMZN, GOOGL) started rising after the pullbacks.

Well, these Phoenixes were the first sign that the market pullback was over.

Then, Monday morning, the market opened up with practical cannon fire….

After bad news on Boeing, it was able to rally, erasing losses and ending the day with a bang. The rally has continued, and, yet again, we end up back at resistance at 2820.

So, where does that leave me?

I remain bullish this market. Last week, we saw the first ‘significant’ pullback since the start of the year after the market paused at 2820 in the S&P, which, is a natural place to pause.

With so many betting against this level, I continue to analyze that a break here to the upside will cause a ‘melt-up,’ sending the S&P on to new highs at my ultimate target at $3,000.

S&P Daily Chart:

Notice how many times price has paused at $2820 since October?

Everyone who’s questioned the rally will want to get in (a clear case of FOMO) and could send it rallying rapidly. The S&P’s haven’t been able to breach this level since October, and a break higher would be quite significant.

Typically, on a break of resistance like this I look for market leaders to push it through, or a macro catalyst to send it higher (for example, the China deal). The main thing I see on the horizon is earnings.

Looking at Phoenix Flyers: Cloud Kings Arising

When I’m especially bullish the market, I like to focus on Phoenix Flyers. These are the hot industry groups. The cloud kings are one of them.

The cloud kings specifically have lead the charge in this market rally since December 26th, and they continue to do so. I call these my ‘Phoenix Flyers’ because they’re the first to rally after market pullbacks. After the pullback we saw in the cloud stocks last week, it provided excellent entries.

Phoenix Grid: Cloud Kings: Daily Chart:

Notice how quickly these cloud stocks triggered to the upside, after the December rally?

Cloud Kings Triggering

After the market pullback we had last week, you always want to drill down to your lower time frames, and look for an upside trigger. Why? This’ll tell you the pullback is now over. That’s what we’re seeing in most of these cloud stocks, as of now.

Phoenix Grid: Cloud Kings: 78-minute Chart:

See those triangles? That gave you bullish entries after the pullback in the market last week, in all these high flying names.

The Earnings Impact

ADBE and ORCL earnings are up after the bell tomorrow, and the bullish sentiment leading into the report continues to push these stocks (and the whole industry group) higher.

For stock picks…

I like Salesforce for a break into new highs. I’m trading it into between $170-175. The pullback on earnings gave a great opportunity for a new entry.

I also like WDAY for a break to new highs, with a target of $206 then $215. I’ll be trading them in the trading room (if you want to join, snag a $7 trial HERE).

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