The Next Market Leaders - 1/12
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The markets have put in a semi-convincing bounce after the sell-off on Monday, but breadth is still poor and the bounce has been mostly led by energy and finance stocks. Meanwhile, former leaders in tech like DDOG, ASAN, and CRWD, have been getting crushed and are failing to put in much of a bounce, signaling that more selling seems likely.
This move up has given us some very playable chart patterns in other industries beyond typical growth and is starting to set up for new short positions in the tech behemoths. Let’s get into it!
Index Updates
The Nasdaq bounced off of the 200-day moving average nicely and rallied back into the recent trading range. The 50-day MA is curling down which is no good, so I’d like to see a rally back above the line in yellow and test the orange resistance. I wouldn’t be surprised to see the 50-day MA rejected if price gets that high, in which case it looks headed back down to the 200-day MA; this is a level that needs to hold or we’ll see much lower prices.
The S&P-500 dipped down to my descending trendline level in orange and bounced perfectly off of it. This turned out to be an excellent place to close short positions; I’ll remember that and watch this level closely when opening new shorts.
Recent Moves
TQQQ - Bought this 3x leveraged ETF of the QQQ as it bounced off of the 200-day moving average and traded all the way up to $155 today. I took profits along the way, averaging a 7% gain.
WLL - Bought at $73.32 and took 1/3 profits at $76.12
AMR - Bought just above our buy point at $66.50.
CUBI - Bought at $72.36 and sold at $70.93 as it fell to my stop.
My Positions
Whiting Petroleum Corporation (WLL) formed a flat base pattern and tightness in price in the days leading up to the breakout yesterday. Then it moved through my $73 buy area on high volume, so I bought just above this level and took 1/3 profits at $76.12.
Remaining stops: $71.18
Alpha Metallurgical Resources (AMR) is a pick from Sunday night’s newsletter where I noted it’s cup-with-handle pattern indicating a $66.50 buy point. Now that all of Fintwit is talking about it, remember you heard it here first! I bought it at $66.65 and it’s up over $5 already. I took 1/3 profits today at $71 for 7%.
Stops to even on the rest.
Best Setups
Cenovus Energy (CVE) is a pick from Sunday’s issue where I noted that the buy point was “$13.75 or lower around the $13.50 support might be better.” It dipped to $13.40 on Monday where we could’ve picked some up, but I passed as I was happy with my market exposure. It’s up 7% already. Move stops up to even if you got in.
Pioneer Natural Resource (PXD) is another leader in oil & gas that I noted on Sunday with a “buy point is as close to $197 as possible if it returns to support”. It sipped to $195 on Monday where we could’ve picked some up. I skipped out on this one too, which is a shame, because 7 days straight of above-average volume is super sexy and indicates institutional accumulation of the stock.
ZIM Integrated Shipping (ZIM) is a shipping stock with absolutely stellar earnings numbers and I noted to buy on a break above $61.75 with high volume. I skipped it because my gut told me no as it chopped around through the buy point. Gotta go with my gut as it’s right more than it’s wrong, but it was wrong here. I’ll look for another place to buy this stock as it’s 3% past the buy point already.
Grindrod Shipping Holdings (GRIN) is another shipping stock that’s moving higher, but it’s a bit thin on average volume. Nevertheless, the buy point is a follow-through above $19.50 on high volume with stops at $18.80.
Flex Lng (FLNG) is an oil & gas transportation company with accelerating earnings and a great chart. The resistance at $24 was blown through on heavy volume for this stock, but it looks extended in the short term and likely needs a rest. If it comes back down to $24, I’ll look to buy if this level proves itself as support.
Matador Resources (MTDR) is an oil & gas exploration company that hasn’t broken out yet, but it’s close behind the others in the group. It’s formed a cup-with-handle pattern with a buy point of $44.50 on heavy volume. Stops $1.50 lower.
Ford (F) is holding up well after its recent breakout. I made a tidy 8% gain on the breakout but sold my remaining shares. The next buy point is a move above $25 on high volume with a tight stop $0.75 lower.
Micron Technology (MU) is also holding up really well given the recent market volatility. It’s been trading in a tight range for the past 3 weeks. I’d buy a break above $98.5 if supported by high volume.
Short Setups
If the market turns down and sells off further, here are some short positions that you can consider. These are dependent on high sell volume and downward price movement as short sales tend to be more momentum-driven.
PayPal (PYPL) has barely even attempted a bounce after moving down more than 30% and it’s forming a bear flag that might lead to lower prices. I’d short-sell a break below $182.75 on volume with buy stops $4 higher.
Dutch Bros (BROS) has a super bearish chart from IPO and I’d look to short-sell a break below support at $44 with buy stops $1.50 higher.
Chegg (CHGG) is another UGLY chart that can’t even manage a bounce and is forming a bear flag. Short sell a move below $27.75, but high sell volume is the key to look for here.
That’s all for tonight! If you liked this column or have any feedback about the content, hit me up on Twitter with the link below or respond to this email.
See you back here on Wednesday night for an update on our stocks. Good luck starting out your year, here’s to making it the best one yet!