This simple strategy might be your best bet: Technician

One technical analyst says we are no doubt in a bull market — and sees further gains ahead, eyeing several key charts.

Piper Jaffray senior technical analyst and managing director Craig Johnson on "Trading Nation" Monday addressed the market while discussing a new report from Bank of America Merrill Lynch that suggested investors should favor buying the most underowned stocks.

"This thesis does seem to make some sense, but it works in a market that's sideways consolidating, and right now we're in a bull market, and we think there's going to be more upside ahead," Johnson said.

Several factors contribute to Johnson's optimistic outlook, including the dollar and financial stocks.

"The U.S. Dollar Index appears to have confirmed support at the lower end of a multiyear consolidation range; we suspect a return back to the 200-day moving average is now unfolding; we suspect more near-term strength lies ahead," Johnson wrote in a Monday note to CNBC, citing a dollar index chart with a 200-day moving average showing year-over-year gains.

When it comes to the financial sector, Johnson wrote in the note that he sees an "interesting downtrend reversal underpinned by a move higher in yields," and suspects another "leg higher" is underway.

Looking at the utilities ETF, the XLU, another factor that Johnson sees at play here, though an area that may suffer in the short term, he notes the sector "appears to be engaging in a deeper pullback after recently violating an uptrend support line."

Johnson suggests reducing positions.

"So, I'm not sure how long this particular trade is going to last," Johnson said on "Trading Nation," referring to the Bank of America Merrill Lynch report on overowned and underowned stocks.

"I want to just be long this market and long good, solid equities."


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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