The Next Market Leaders - 11/27
Markets drifted up on low volume last week as bullish seasonality kicked into effect, and many leaders meandered around their pivot points. It was difficult to establish any new commitments with the volume acting as a weak signal for directional movement, but price led the way for the indexes, so we continue to receive evidence that it’s time to be testing buys.
Leadership has improved, and a lot of charts have tightened up after last week’s low-volume action, so now we need to see volume come back in to the upside. I won’t hesitate to increase long exposure if that happens and continue to do so as initial trades start working. As of now, I remain in the pilot-position mode of progressive exposure, which indicates to me that it’s still not the time to get aggressive, but that can change quickly. Powell speaks on Wednesday afternoon.
Tonight, I’ll review many of the leaders from last week that continue to set up constructively, with several are at or near their pivot points. Let’s get into it!
The S&P-500 is now trading above the short-term moving averages, 21EMA, and net highs/lows will be back to a green reading with net highs tomorrow for three days straight. You can see a bit of choppiness in these indicators, but the index has remained above the rising 21EMA for the past two weeks.
The Nasdaq is consolidating after a successful test and hold of the 21-day EMA, but the 50 and 200 MAs are still declining. After a super low-volume inside-day on Friday’s half-day, we’ll see if it can trade up and test the resistance area around 11,500. Watch for the 21EMA to continue to hold.
The S&P-500 is coming up on an underside test of the declining 200-day moving average after several days in a row of low volume. This is a key area to break above and hold if this uptrend has legs, but in the short-term, look for the 21EMA to continue to be respected; a back test would not be surprising.
Impinj (PI) traded up through the flat box pattern on above-average volume Wednesday, and followed up Friday with a low volume inside-day. It would be good to see follow-through volume come in above Friday’s high to confirm the breakout. If that happens, it can be added at $124 with stops at $119.
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) remains a bit of a bucking bronco, but is wedging up on continuously decreasing volatility into the $325 buy point. Volume should be stellar above this area, and be ready to protect your cost basis if there is a quick reversal.
First Solar (FSLR) is the leader in solar, but has been moving into new highs on lower and lower volume. That’s not unexpected with the holiday week, but does pose a bit of divergence from price. I wouldn’t be surprised to see a test of $160 which would be a buy area.
Constellation Energy (CEG) moved up through the base-on-base breakout area to all-time highs, but the lack of volume made it difficult to buy. Friday was an inside-day, so a move above $97.50 on high volume could be bought with stops $2 lower for a low-risk entry.
Global Foundries (GFS) is acting very constructively above support at $66 and resistance at $68. It is one of many semiconductor stocks showing relative strength, so I’d look to buy a high-volume breakout at $68 with stops $2 lower.
On Semiconductor (ON) has the characteristics of a cup-with-handle pattern setting up for a breakout through $76. I’m looking for at least 140% average volume on the breakout day to serve as confirmation for this choppy stock.
Rambus (RMBS) is one of the best semiconductor charts out there, tightly consolidating after a 30% move from the prior breakout. There aren’t many sellers in the stock. Friday’s ultra low volume inside-day provides a low-risk entry point at $38 with stops $1 lower. Watch for high volume.
Sanmina Corp (SANM) gapped up after the latest earnings report showed 3 straight quarters of accelerating earnings, sales, and margins. Now it’s consolidating in a tight range like RMBS, and is flashing a low-risk entry point at $67 with stops at $65.
Celsius Holdings (CELH) ripped higher over the past two days and is very close to completing the cup-with-handle pattern with a breakout at $110. There isn’t a great technical spot to manage risk, so I would only take this one with a strong volume signal and would cut quickly if it showed signs of failing.
Super Micro Computer (SMCI) has fantastic earning growth and is a potential leading stock. I noted to consider it on a test of the 10-day MA - that occurred on Tuesday, and it’s up 12% from there. Watching for another entry to form.
That’s all for tonight! See you back here on Wednesday night for an update on our stocks.
P.S. This marks the 1-year anniversary (the 97th issue!) of The Next Market Leaders. Thanks to each and every one of you for reading!