Crypto & Software Crash: Leverage Wiped, Potential Rally Emerging
Weekly Outlook 02/09/26
Market Recap
It was an overall volatile and action packed week, marked by sharp moves across multiple asset classes. Silver saw another surge in volatility, bouncing for several sessions early in the week before breaking down again and making new lows on Thursday.
Software stocks IGV 0.00%↑ extended their selloff before finally finding some stability into Thursday and Friday, while Bitcoin continued its broader decline before capitulating near the $60,000 level and reversing sharply on Thursday. The simultaneous weakness in software and crypto gave the sense of broader market deleveraging, with spillover selling pressuring other sectors as well.
I noted both software and crypto were approaching extremely oversold conditions, setting up the potential for a sharp bounce, which ultimately played out and led to an opportunistic trade setup (trade recap).
To close out the week, QQQ 0.00%↑ rallied roughly 2% on Friday, with futures across all major indices printing engulfing reversal bars, and the Dow Jones DIA 0.00%↑ closed at a new all time high. The Russell 2000 small cap ETF IWM 0.00%↑ managed to close the week positive, continuing to show relative strength.
After a week filled with outlier moves, it appears leverage has likely been reset across many assets. The recent market has been dominated by value, industrial and energy stocks lately, but with Friday’s strong breadth, the conditions are in place for a potential new rally to begin forming in tech and growth.
Watchlist
Earnings season continues, with several key names on watch this week.
HOOD 0.00%↑ and COIN 0.00%↑ are in focus following recent capitulation moves, with earnings reactions likely to reveal whether peak pessimism has already been priced in.
ALAB 0.00%↑ a semiconductor company with strong fundamental growth, reports on Tuesday and has been building a base.
VRT 0.00%↑ an AI infrastructure name, is setting up for a potential 200-MA breakout but reports on Wednesday, making earnings a key catalyst.
ANET 0.00%↑ and NBIS 0.00%↑ also remain on watch.
A couple of sectors are standing out with relative strength.
In fiber optics tied to GPUs and datacenters, LITE 0.00%↑ LUMN 0.00%↑ COHR 0.00%↑ FN 0.00%↑ and GLW 0.00%↑ are showing constructive action.
Within datacenters, WYFI 0.00%↑ made a strong move off the lows. NBIS 0.00%↑ saw a strong rebound on Friday and held the 200-SMA. CRWV 0.00%↑ also rebounded sharply on Friday, printing a higher low on the daily base. IREN 0.00%↑ staged a strong rebound after capitulating in after-hours on earnings, while WULF 0.00%↑ remains in a sideways consolidation range spanning the last few months.
NVDA 0.00%↑ still looks constructive holding the sideways range it’s been in since last summer, with earnings later in the month likely to be a catalyst to break either side of the range.
RCL 0.00%↑ travel stocks have been breaking out, with CCL 0.00%↑ making new highs last week.
CLF 0.00%↑ steel stocks remain in uptrends but report earnings on Monday, making results a key catalyst.
VG 0.00%↑ oil stocks are in an uptrend with breakout potential.
ENPH 0.00%↑ solar stocks continue to trend higher and are digesting a recent earnings gap.
Overall, more stocks are setting up for bullish continuation patterns. While IWM 0.00%↑ and DIA 0.00%↑ remain firmly in uptrends, it would be constructive to see QQQ 0.00%↑ reclaim all of its key moving averages to signal full alignment and a more risk-on environment for growth and technology stocks.
Trade Highlights
BITX 0.00%↑ BTC reversal:
COIN 0.00%↑ CONL 0.00%↑ reversal in Coinbase with crypto basket:
HOOD 0.00%↑ reversal with crypto basket:
HYMC 0.00%↑ gold miner short after parabolic backside:
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