Magnificent Seven ETF is on the Brink of Collapse. Here's What the Charts Predict

What are the chances that the Magnificent Seven ETF can reclaim its dominant position?

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Although its key holdings remain prominent, many of them have struggled to make significant progress in recent weeks. Like much of the market, MAGS experienced a notable surge around the election. From Tuesday, Nov. 5, through Monday, Nov. 6, the ETF skyrocketed by 9.8%, marking its best five-day performance since its launch in April 2023. While the ETF’s history is still brief, it has previously posted a handful of strong five-day rallies. In fact, there have been five prior instances of gains exceeding 7% over such a period.

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Three of those instances (November 2023, February 2024, and late September 2024) led to additional near-term gains. However, on two occasions (July 2024 and August 2024), those rallies marked short-term peaks, followed by pullbacks. Although buying interest eventually returned after those setbacks, the immediate risk-reward profile was less favorable for investors.

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Notably, the recent surge marked the third time MAGS gained over 7% in five days while setting a new all-time high. The previous instances in February and July 2024 resulted in distinctly different outcomes, illustrating the unpredictable nature of post-rally price action.

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In the current trading environment, MAGS has yet to capitalize on its recent momentum, which was also the largest five-day rally in its history. Since Nov. 11, the ETF has declined in 10 of the past 12 trading days, including four drops of at least 1%. This pattern of losses is not encouraging for bullish investors. Although MAGS has so far avoided breaking below key support levels, it is teetering near critical thresholds.

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If the ETF can hold at these levels, it may remain within a potentially bullish pennant formation, a key chart pattern that often signals the continuation of upward trends. This formation is significant because MAGS has demonstrated its ability to capitalize on short-term bullish setups, particularly during similar patterns observed in September and October 2024.

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To regain its upward momentum, MAGS will need support from its seven major holdings. Analyzing these stocks’ relative performance compared to MAGS reveals a mixed picture.

• Tesla (TSLA): Recent spikes in TSLA triggered a parabolic move relative to MAGS, but this momentum is likely to cool. A similar pattern occurred with Nvidia (NVDA) in June, where its relative surge was followed by a period of zigzagging. Currently, NVDA/MAGS is testing a key uptrend line established in April, and TSLA may follow a similar path in the short term.
• Nvidia (NVDA): Although NVDA has been a strong performer, its relative strength has fluctuated since the summer, leaving its outlook uncertain as it teeters near important trendlines.
• Apple (AAPL), Microsoft (MSFT), Meta (META), and Alphabet (GOOGL): These tech giants have significantly underperformed MAGS in recent months. Among them, AAPL has shown some recovery, bouncing from relative lows, while MSFT stands out for its persistent downtrend since the spring.
• Amazon (AMZN): AMZN has been the most consistent among the holdings, matching MAGS’s performance since the summer, as reflected in its relatively flat trendline.

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MAGS’s ability to sustain its buoyancy depends heavily on the performance of its components. While Nvidia’s stability and Tesla’s short-term overextension are key factors to watch, the remaining five holdings must step up to provide broader support.

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If a rotation among these market leaders materializes, MAGS’s current bullish pennant formation could drive another breakout to new highs. However, if these stocks fail to rally collectively, the ETF may need to consolidate further before attempting another move higher.

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The path forward for MAGS remains uncertain as it hovers near pivotal levels. The ETF’s history suggests that short-term rallies can either fuel additional gains or signal pullbacks, depending on market conditions and the performance of its holdings. For now, investors will be watching closely to see whether the “Magnificent Seven” can align to propel the ETF back to leadership or if the market will need to recalibrate once again.

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