The Next Market Leaders - 11/2
The Next Market Leaders - 11/2
Markets sold off aggressively during Jerome’s press conference as he sounded a bit more hawkish and determined to continue raising rates than the market perhaps anticipated. As I noted in my morning thoughts, there was a lot of risk going into this meeting in that the journalist leak about a Fed pivot in December that prompted the brief rally was taken as gold. There wasn’t much talk of a pivot in today’s conference, and that consequently led to the selloff. Breadth was poor this morning for the first time in a few weeks, and it shouldn’t have been too difficult to cut risk going into the gamble of FOMC. If you didn’t, take that as a lesson for next time.
The recent rally was fun while it lasted - the first stocks that broke out early last week were the biggest movers, and I made decent progress in my account over that time. Today I sold or was stopped out in profit on my remaining positions, and now I’m back to the drawing board in cash. That’s the way it goes in bear markets; there are brief windows of opportunity to make money, and the recent window appears to have closed today. On to the next one!
Following the action of individual stocks has been extremely key in the past few weeks. There were very little stocks setting up constructively this week. That’s doubly the case after today’s turn of events. Most charts are busted up and the leaders need more time to put in a base. We’ll know when it’s time to get back in when more stocks start setting up and breaking out again. That said, tonight will mostly feature updates on the breakouts from recent weeks. Let’s get into it!
Index Update
Market internals weakened today with net highs/lows showing a down reading and the S&P-500 falling back below all key moving averages. Not a great sign.
The Nasdaq put in a distribution day on high volume, falling back below the 21EMA and key support level. This index is now back below all declining key moving averages. If it can’t post a quick turnaround following the initial FOMC reaction, it looks to be headed back to test the YTD lows at the least.
The S&P-500 was looking good as the index leading higher before slicing back down below the 50 and 21-day moving averages on heavy volume today. It looks to be a relatively feeble bounce attempt, not able to reach even the 200-day MA for a lower-high. Look for it to quickly regain the moving averages or else it’s headed back down to lows.
Stock Updates
Super Micro Computer (SMCI) is one from Sunday where I noted “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”. That would’ve worked wonderfully and been up 15% intraday given the strong earnings reaction this morning, but I didn’t take it as my plan was to reduce exposure going into FOMC. Watching this one.
Constellation Energy (CEG) broke out on Thursday on good volume. It still looks OK as it’s holding the breakout area, but I sold it for a small profit after the market broke down this afternoon. Earnings 11/8. Keeping it high on the watchlist for another buy.
Ardmore Shipping (ASC) is up 17% from the bull flag buy point. It would have been a good idea to take off at least a portion for profits before earnings today, but the reaction after-hours looks positive for now.
International Seaways (INSW) is up 22% from the buy point. I’d take some profits here if you haven’t yet.
Devon Energy (DVN) reported earnings this morning and sliced back down through breakeven stops. I noted on Sunday that I’d “look to have a bigger profit cushion before earnings or I’ll sell the position.”. This chart is the reason why. Holding into earnings, especially in this tape, is a tossup.
Marathon Oil Group (MRO) is a trade that I closed this morning up 4% before it reported earnings this afternoon.
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!
First Solar (FSLR) came roaring back to new highs after reporting earnings last week. We’ll have to watch and see how it reacts to any market pressure over the next few days/weeks. I’d consider it on a test and hold of the $140 breakout area, or else I’ll keep watching for another buy point.
Clearfield (CLFD) is still building out a cup with handle pattern and reports earnings tomorrow afternoon. If it’s a strong report, I’d consider buying a power earnings gap as close to $125 as possible. Buying it also depends on the market action over the next few days.
That’s all for tonight! See you back here on Sunday night for an update on our stocks.