Weekly Pairs in Focus: #NASDAQ100 Index,#SP500 Index,#Bitcoin & #Cocoa Futures (19–23 Feb 2024)

NASDAQ 100 Index

The NASDAQ 100 Index fell last week after initially reaching a new record high price at the start of the week. Its closing price was right on the low of the week, which is a bearish sign. However, there is no doubt that US stocks have a bull market and a valid long-term bullish trend. It may be wise to buy the dip, assuming this is just a normal bearish retracement.

Although we expect no rate cuts and a strong dollar until the summer, the long-term bullish momentum in stocks should be addressed.

Look for a long trade following a bounce at the nearest support level or a daily close above 17962.

S&P 500 Index

The S&P 500 Index closed a little lower last week after making a new record high on Monday. However, the price made up most of its losses earlier in the week. The S&P 500 slightly outperforms the NASDAQ 100, suggesting a relative weakness in technology stocks.

I still see the S&P 500 Index as a buy, as this bearish retracement is nothing to get excited about, but I would prefer to see a daily close at a new high before entering any new long trade.

Another reason the long-term outlook is bullish is that its first break to a fresh all-time high, as happened just a few weeks ago, has historically generated an advance of a median of 13% over the following year. Traders and investors should seriously consider going long here.

Bitcoin

Bitcoin made a firm bullish breakout two weeks ago, and an additional rise over the past week followed this. The price is now well above the important round at $50k. The price had made new 20-month highs. However, a note of caution can be found in the meaningful upper wick of last week's candlestick.

I see Bitcoin as a buy, given legs by the recent approval of Bitcoin ETFs, which attracts more retail investment, as it is now trading in bullish blue sky.

Bitcoin has shown before that it can make gains, which puts it on par with commodities so that trend traders will be interested here on the long side.

However, despite the weekly candlestick looking bullish, a zoom into the daily chart shows the price action over the past few days, suggesting a bearish topping out. Therefore, I would wait until we get a daily close above the high closing price of $52,161 before taking a new long trade here.

Cocoa Futures

Cocoa futures have been in a strong bullish trend for over a year, but last week, the price fell quite strongly after reaching a new multi-year high price. The price chart below applies linear regression analysis to the past 74 weeks and shows graphically what a great opportunity this has been on the long side over the long term.

There are two things especially worth noticing here:

1. Despite the downward move last week, The price is quite far above the linear regression channel.
2. Volatility is extremely high, and Cocoa is getting much media attention.

These factors suggest an even stronger dip may be coming now, making it dangerous to enter a long trade unthinkingly here.

Trading commodities long on breakouts to new 6-month highs has been a profitable strategy over recent years, so I see this as a buy. However, it is worth waiting for a daily close above the recent high to be sure the extremely high volatility is not a sign of this trend ending, as it often can be.

Bottom Line

I see the best trading opportunities this week as:

1. Long of the NASDAQ 100 Index following a daily close above 17962.
2. Long of the S&P 500 Index following a daily close above 5030.
3. Long of Bitcoin following a daily close above $52,161.
4. Long of Cocoa Futures following a daily close above 5800.

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