Shares of global public securities exchange group Nasdaq OMX Group, Inc. (NASDAQ:NDAQ) rallied Monday along with the rest of the financial sector, which was the second-best performing sector on the day amid a broad-based quarter-end rally. As a result, NDAQ now looks like it’s itching to break past a crucial technical area of resistance, which also could accelerate the stock higher.
As I have been discussing in this column for nearly two months now, the financial sector’s lack of consistent relative and absolute strength is at least part of the reason for the weak year-to-date performance in the S&P 500, and has kept the broader market in this current holding pattern.
Sooner or later, if the broader U.S. stock market wants to make another attempt at new highs in coming weeks/months, then the financial sector will have to begin participating in a better way.
One way of trying to get ahead of the curve and preparing for strength in a sector is by looking for single-name stocks within said sector that are showing relative strength versus its peers. That way, when the sector is ready to move higher, the stock in question will not only rally higher with help from its sector, but might show continued relatives strength on its own terms.
NDAQ Stock Charts
Case in point, NDAQ has showed plenty of relative strength versus the financial sector — represented in the below chart by the Financial SPDR (NYSEARCA:XLF) over the past few months and as a result has reached relative strength levels not seen since 2011. On the below chart, note that this ratio is bumping into the red dotted line and is visibly coiling up for a break higher (another indicator of Nasdaq OMX’s relative strength versus the sector).
On the multiyear weekly chart, we see that thanks to the year-to-date rally in NDAQ, the stock has worked its way up to its previous all-time highs from 2007. Given the multiyear round trip and the number of years it took the stock to crawl back up to these highs, a more sustainable break to new highs naturally takes time.
Finally, on the daily chart we see that NDAQ stock has been consolidating since mid-February and is coiling up below the long-term resistance line since 2007. For the most part, the consolidation has been taking place above the December and January highs, which shows the underlying bid that is present in the stock.
With Monday’s rally, NDAQ stock once again pushed above its near-term moving averages (8- and 21-day in blue and yellow, respectively) and is now only about one point away from breaking higher.
Active investors could look to buy NDAQ stock on a break past $51 for a multiweek/month move into the $55 area, while any bearish reversal back below the near-term moving averages would negate the immediate setup.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.
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