The Next Market Leaders - 10/26
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The Next Market Leaders - 10/26
Markets faltered today on poor earnings reactions from tech giants GOOG and MSFT after the Nasdaq put in a follow-through-day yesterday. It looks like we might be in store for more distribution as META is down 13% after reporting poor earnings at the close, but overnight futures are still green.
Despite the action on the indexes, things looked healthy underneath the surface today as advancing stocks outpaced decliners by a wide margin. Many individual stocks added to solid breakouts, including the picks featured here on Sunday, though most daily gains were pared a bit with the indexes sliding into the close.
It’s excellent to see a character change in that trades are working well for the first time in months. The feedback on recent buys says to buy more, so now is the time to be extremely vigilant for the next market leaders to set up again. Obviously, things can change quickly, so be ready to be stopped out (in profit) in the scenario that it all goes south again. Watch for key areas on the indexes to hold while leading stocks act constructively. If that happens, it’s time to get aggressive on the next move.
Tonight I’ll review updates on many of our stocks that broke out and other leaders that are setting up. Let’s get into it!
Index Update
The Nasdaq remains above both the short-term moving averages and the 21EMA, and today net highs/lows flipped positive in a sign that market internals are improving.
The McClellan is in overbought territory and touched 230 today, signaling the need for a bit of a break back to at least the 50-100 area
The Nasdaq followed through yesterday, but then put in a distribution day today. That increases the probability of a FTD failure. I’m looking for the 21EMA in blue to hold as support and then for price to trade through the upper resistance area in orange to confirm a double-bottom.
The S&P-500 broke out through the double-bottom resistance area in orange, but got stood up at the declining 50-day moving average today. Watch for the breakout area to hold as support, or at the very least, the 21EMA a bit further down. If these areas hold while leading stocks continue to act constructive, that would confirm my thesis that it’s time to get aggressive.
Stock Updates
Ardmore Shipping (ASC) broke out of the bull flag on high volume and continued higher today. It’s up 8% from the buy point. Stops at 11.75.
Clearfield (CLFD) moved up very quickly through the $108 buy point with high volume and is up over 10%. This one has an excellent pattern and should provide a secondary buy point if it builds out a handle. Stops to even.
ShockWave Medical (SWAV) traded up through the descending trendline buy point and was up over 12% today before getting rejected at new highs. Stops to even - I don’t love the choppy action in this one. We’ll see how it reacts over the next few days.
Devon Energy (DVN) is one of the energy plays last week that I noted to add on a hold of $74, and now it’s up 4%. Keep stops just below $73.
Marathon Oil Group (MRO) traded up through the inside-day buy point, albeit with low volume. Volume is a bit less important on oil-related breakouts. Up nearly 4% from the buy point with stops at $28.75.
Best Setups
The setups below are ideas, not outright buys; placing a trade is discretionary and depends on both the price action and volume. To succeed, you’ll need to make the trade your own based on your rules for entering and taking profits, and always use a stop-loss!
Aspen Technology (AZPN) reported a stellar earnings report after hours today with an EPS surprise to the tune of 76%. It’s setting up really nicely by trading in a tight range just below all-time highs. The pivot point is $259 with volume. Stops at $251.
Constellation Energy (CEG) is a recent IPO providing energy utilities in the US and is poised to benefit from the Inflation Reduction Act. After a 30% gain from the recent breakout, it’s still trading quietly in tight range on low volume above the moving averages. The buy point is a breakout to new highs at $90 on high volume with stops $3 lower.
Enphase Energy (ENPH) reported a consecutive earnings report with triple-digit EPS growth and gapped up 10% today on high volume. We’ll see it it has the strength to push should the overhead resistance. I’d look to buy this one on a move through $298 and add on a breakout to new highs at $323. It could also be considered on a test and hold of the 50-day MA for low-risk with stops at $278.
First Solar (FSLR) reports earnings tomorrow after the close. If the report surprises and the reaction is positive, I’d consider buying with $140 as the pivot point. ENPH reported a great report yesterday so I’d expect something similar for this leader.
Profrac Holding (PFHC) is an oiler that IPOed in May and is holding right in there in terms of relative strength. It got held up at the breakout point today, so I’d love to see another few days of consolidation to firm up a better technical stop before moving up. The double-bottom pivot point is $22 on heavy volume.
Other leaders on my shortlist: AEHR, HLIT, SGML
That’s all for tonight! See you back here on Sunday night for an update on our stocks.