Naughty Flicks

Skip NavigationMarketsBusinessInvestingTechPolitics & PolicyVideoWatchlistInvesting ClubPROLivestreamMenu(See the video above for Frank’s complete chart breakdown.) Today, we’re looking at the Invesco Pharmaceuticals ETF for two reasons: its continued outperformance and how its technical structure provides a useful example of identifying relative strength when scanning for potential trades. The first daily chart, going back to July, shows PJP rallying through the summer, topping in late August, and pulling back into October before advancing again. But zooming out tells a more complete story. The advance actually began in late March and continued through mid-August. The subsequent pullback found support near the 119 to 120 zone, an area that coincided with both prior congestion from July and the 38.2% Fibonacci retracement of the March-to-August advance. These two forms of support suggested a normal pullback within a longer-term uptrend, with buyers stepping in near a key technical area. Another positive has been the tendency for bullish patterns to deliver on their upside targets. Between March and May, PJP formed an inverse head-and-shoulders pattern. The breakout reached its upside target and extended higher, helping fuel a multi-month advance. A similar development occurred in October, when PJP held support and formed another bullish pattern. That formation remains in play, with a potential upside target of 137. The weekly chart provides additional confirmation. PJP has been trending higher since at least 2023, with breakouts to new all-time highs followed by sustained gains in 2024, 2025, and earlier this year. A new breakout would mark the fourth such occurrence. One of the simplest ways to identify relative strength is to scan for stocks or ETFs trading above their 50-day and 200-day moving averages. PJP has spent most of its time above the former and hasn’t touched the latter in quite some time. That strength is particularly notable given the broader market. As of Thursday morning, Nov. 5, only 25% of the approximately 170 ETFs we follow were trading above both moving averages. Consider SMH, which spent much of the year above both lines but began deteriorating in July. It has since struggled around its 50-day moving average and recently broke below its 200-day moving average. A scan using these criteria would have excluded SMH while continuing to identify PJP. The bottom line: We want to align ourselves with areas demonstrating relative strength. Successful bullish patterns, support holding during pullbacks, sustained breakouts, and favorable moving-average positioning all help identify potential opportunities. By those measures, PJP continues to stand out, particularly as other areas of the market experience technical deterioration. Frank Cappelleri is the founder and president of CappThesis , an independent research firm that helps active investors through time-tested chart and statistical analysis. Prior to starting CappThesis, he spent 25 years on Wall Street as an equity sales trader, technical analyst, research sales specialist and desk strategist. DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, or its parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.Read More