The Next Market Leaders - 10/30
Markets closed out the week strong, absorbing double-digit losses in mega-cap stocks AMZN and META after each posted relatively lackluster earnings. That is very important positive feedback. Market breadth has been excellent. Last week, I noted to get aggressive if key areas on the indexes held while leading stocks acted constructively. That’s what happened on Friday morning and I acted quickly on it. Scanning individual stocks gives you X-Ray vision into the market.
One problem in further increasing exposure is the Federal Reserve meeting on Wednesday. This could shake markets up quite a bit, so I’ll likely be looking to take some profits before, or at least tightening up profit stops. There are many more earnings reports this week as well, so make sure you are aware of these for any stocks you hold or are considering buying.
Many of our stocks moved up and away from buy points, including CEG up 4%, CFLD up 12%, ASC up 10%, and ENPH up 2%. There aren’t a whole lot of stocks in buyable position here; most leaders are too extended and need to form new bases with new buy points, but there are a few I’m watching closely. Let’s get into it!
Internals have greatly improved over the past few weeks, as net highs/lows are now positive while the market is above all key moving averages. This is the first time all of these indicators are green since August 28th.
The McClellan Oscillator shows great strength, but also indicates the need for a rest as it is deeply overbought at 215.
The Nasdaq faked out below the 21EMA but fought back above it on Friday. It’s now just below the double-bottom resistance area which coincides with the declining 50-day moving average. This index is lagging the S&P-500.
The S&P 500 started out on Friday between a rock and a hard place, or between the support of the breakout zone and resistance of the declining 50MA. The third time that it tried to break through this moving average was a charm and it closed much higher on a powerful move. The target from here is a move up to the 200-day moving average.
Constellation Energy (CEG) was at the top of the list for setups over the past week and broke out on Thursday on good volume. It moved higher on Friday on average volume; not the booming follow-up volume we want to see, but not too bad. It’s up 4% with stops at $88.50. Earnings 11/8.
Ardmore Shipping (ASC) is up 9% from the bull flag buy point. Stops at $12. Earnings Wednesday.
ShockWave Medical (SWAV) was up over 12% from the buy point before getting rejected at new highs, and I noted to move stops to even because “I don’t love the choppy action in this one”. It broke down to $290 and lower where it was stopped out. Avoiding for now.
Devon Energy (DVN) tested the breakout point at $74 but closed $2 higher. Stops still at $73. Earnings on Tuesday - will look to have a bigger profit cushion before then or I’ll sell the position.
Marathon Oil Group (MRO) saw a low-volume sell day that nearly tested the buy point, but ending up closing in the middle of the range. Nothing wrong with that action. Stops still at $28.75. Earnings Wednesday. Chart image withheld due to email size.
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!
Enphase Energy (ENPH) moved up through $298 and closed 5% higher before coming down to test the breakout point the next day. I bought right at $298 but noted that I sold at $304 after-hours Thursday after FSLR reported a poor earnings report. Should’ve probably held onto it. Stops at $292 if you’re in. Look for an all-time high breakout at $323.
Clearfield (CLFD) moved up very quickly through the $108 buy point with high volume and is up over 10%. It’s building out a handle with a secondary buy point at $124 but only if supported by heavy volume. Watch out for earnings on Thursday and take some profit before then if you’re in.
Super Micro Computer (SMCI) is forming a nice pattern here and moved up past the $68 resistance on Friday. It reports earnings on Tuesday - if earnings are positive and the reaction is strong, I’d consider buying a gap-up with volume using the daily range as a stop.
Profrac Holding (PFHC) is an oiler that IPOed in May and is holding up significantly better than most other IPOs. All-time highs are just above at $24 and it could move much higher from there. The double-bottom pivot point is $22 on heavy volume.
Cheniere Energy (LNG) is a natural gas company that has firmed up in price action on the right side of the base. The buy point is a move to new highs at $179 on heavy volume with stops just below $175, but it reports earnings on Thursday, so we might have to wait for after that.
That’s all for tonight! See you back here on Wednesday night for an update on our stocks.