Stocks followed through on last week's momentum with a solid performance across the board. Led by the NASDAQ's push to new 52-week highs, all major averages closed up at least 1.0% on the day. The S&P 500, Russell 2000, and S&P 400 joined the NASDAQ Composite by reclaiming their respective 50-day moving averages. The Dow Jones is the only major average now below the 50-day moving average, but the blue-chip index also showed the most relative weakness during the prior correction.

With the NASDAQ moving to new highs, the weekly bull flag pattern we mentioned on September 6 is moving out right on schedule.

If the breakout leads to a measured move, the NASDAQ could potentially rally another 12% on its next leg up (around the 4,000 area). At the very least, the NASDAQ should be able to cover about 2/3 of its last move up (61.83% Fibonacci retracement), which would put the index around 3,800:



Last Friday (September 6), we added shares to our existing position in First Trust ISE Revere Natural Gas ($FCG).

So far, the additional exposure in $FCG is working out well, as the ETF followed through on last Friday's breakout with another strong volume accumulation day. For a near-term target, we look for a test of the $18.50 level within the next few days to a week:

 

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.