Stocks Blast through Resistance

by Darrin Donnelly on April 20, 2011

Click on chart to enlarge.

Click on chart to enlarge.

On Wednesday, the NASDAQ surged 2.1% higher on its heaviest volume in weeks.

While this action was extremely positive in itself, the real news was that the NASDAQ managed to close above 2800 for the first time since February 18th.

As you can see in the chart that accompanies this article, the 2800 level had been a clear line of resistance for the NASDAQ over the past eight weeks.  While the index tried to break through 2800 on several occasions, it never managed to CLOSE above it.  That is, until Wednesday’s powerful “Accumulation Day.”

This positive behavior officially shifts our market health report from “Neutral Trend” to “Uptrend.”

Prior to Wednesday’s session, we had seen clear signs of strength.

First and foremost, several leading stocks (those featured in this newsletter) have been breaking out of quality bases and racing to new highs over the past few weeks.

Even during sessions when the major indexes were flat or down, leading Darvas Stocks were hitting new highs.  This is a common sign that a market correction (or flattening-out phase) is ready to end.

The Monday session gave us another clue that investors were feeling bullish.

After Standard & Poor’s cut America’s credit outlook to negative and warned that the U.S. could lose its AAA credit rating by 2013, the major indexes gapped aggressively lower to start the day.  At one point, the NASDAQ had dropped 2.1% as traders panicked.  However, as the Monday session went on, the market fought back.  The NASDAQ, while still finishing the session with a loss, was able to close near its intraday high.

This type of resilience in the face of bad news along with strong action among leading stocks tells us the market wants to move higher.

On Wednesday, this bullish sentiment was confirmed by the NASDAQ’s heavy-volume close above 2800.  (Plus, strong after-the-bell earnings news from tech giants Apple and Qualcomm only added to the optimism.)

* Now that we’re in a confirmed uptrend, what does that mean for the individual trader?  Find out the exact rules to follow and the exact stocks to trade in the latest issue of Darvas Trader PRO.

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