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Why chart master Louise Yamada is bullish on 2017

Louise Yamada’s 2017 market outlook

The markets are poised to head higher this year, according to one storied technical analyst who sees strength in the charts.

Louise Yamada of Louise Yamada Technical Research Advisors said the U.S. stock markets made a "stunning" reversal in 2016, as the major indexes saw the worst start to a year on record, and surged after the presidential election in November.

"I think the trend here is to move higher," Yamada said in a recent interview on CNBC's "Trading Nation," citing largely bullish activity in what she calls an "aging bull market."

"We need a little bit of time to digest the gains, I think, but I would suggest use any weakness here as an opportunity to nibble into weakness," she said.

The small-cap Russell 2000 broke out to a new high in November, "obliterating" a topping formation around the 1,300 level, Yamada wrote in a recent note, and turned its weekly momentum positive.

Meanwhile, the Dow Jones industrial average completed and broke through what Yamada deemed a two-year "continuation pattern" of 16,000 to 18,000.

And the was dragged down by tech after the election, Yamada wrote. She calls the index "fragile" compared with the Dow. The S&P 500 technology sector finished 2016 as the fifth-worst performing sector, up 12 percent last year.

Yamada's initial targets for the U.S. markets in 2017 are 1,550 on the Russell 2000, 2,400 on the S&P 500 and 20,500 on the Dow — about 14 percent, 7 percent and 2.6 percent higher, respectively, than the indexes' closing levels on Friday.

Correction: This story was revised to correct that Yamada's target for 2017 is 2.6 percent higher than the Dow's closing price on Friday.