Good evening everyone, and welcome to all the new subscribers since last issue! Hope you all had a wonderful holiday and time off.

Brutal week last week for growth stocks, particularly on Friday, as the market reacted to news of a new Covid variant. New data over the weekend show that may have been a bit overblown in that the new variant has not been proven to be any more deadly or viral. The index futures are up around 1% right now which is a good sign.

That being said, very few stocks are setting up constructively as most stocks were extended heading into last week and got knocked off their highs convincingly. Most stocks will need at least a few days or weeks to form new bases and buy zones, but I’ve listed a few below that can be considered if the market holds up and proves itself on high volume over the next 1-2 days. Let’s get into it!

Index Updates

The Nasdaq broke a key support level at the orange trendline around 15,550, but it could be a shakeout. Volume was lower on Friday due to the half-day so we’ll have to wait for higher-volume confirmation in either direction. Futures say it’ll trade back above this level tomorrow so the 21MA purple line around 15,800 will be the next resistance that might give it some trouble.

The S&P-500 got crushed on Friday after failing to break out at the orange trendline. Friday marks the 5th distribution day (selling down on higher volume than the day before) in 6 weeks of trading which is not a good sign. Look for an improvement tomorrow but be careful as these are very tough market conditions.

Recent Moves

No new buys since last issue given the brutal market conditions, I’m staying in cash until conditions improve.

Sells

• MSFT at $335.50 about even

• Stopped out of FAS at $130 for -9% as the stock gapped down big on Friday along with all financials, good thing this was a very small position as I noted when I entered.

Current Positions

No current positions, I am 100% cash until conditions improve and more stocks set up constructive buy points.

When I do enter a new position, it will be with a smaller position (6.5% of portfolio) to hedge the risk of the market turning back over in short order.

Best Setups

BioNTech (BNTX) jumped on Friday on the Covid fears, they said it’ll take them 2 weeks to research if their vaccine will cover the new strain or if they have to develop a new one. Congrats if you took it at $305 after my note to consider it in the last report, but I passed on it. Looks good to continue higher but might take a rest tomorrow. Next Buy Zone is a break above $373 on great volume.

SiteOne Landscape Supply (SITE) is showing a lot of relative strength against the market as it’s staying within a tight trading range on decreasing volume which means that there aren’t a lot of sellers. The Buy Zone is a break above $255 on high volume with tight stops at $250.

Expensify (EXFY) is a new profitable software IPO that is showing good strength and has formed an IPO base range between $42 and $51. Buy on a break above $51 on high volume with stops at $49.

Advanced Micro Devices (AMD) is acting like a leader in the semiconductor industry by showing strength amid Friday’s selloff and only dropping 2%. If the market is acting well, the Buy Zone is a break above $159 with stops at $152.50.

Globalfoundries (GFS) is a newer semiconductor manufacturer that looks ready to break out of its IPO base. Buy Zone is a break above $70 on high volume with stops at $67.

Sitime Corporation (SITM) is another chip stock that’s showing fantastic earnings growth and great relative strength. Semiconductors are still the clear leaders right now. It broke above the Buy Zone at $302 on Friday but wasn’t able to close above it amid the market sell-off. The Buy Zone is a break above $303 on good volume and add more into all-time highs at $312 with stops at $296.

Trading Tip of the Day

Top performing stocks will lead the market at important inflection points. As a bull market enters it’s late stages, many leading stocks will sell off as the indices continue on higher. Money begins to rotate into laggards, defensive or cyclical stocks that might be less sensitive to economic trouble. If you see this happening, it’s a warning that the bull market may be coming to a close.

That’s all for today, thanks everyone for reading! Remember, be careful out there and don’t dive in with full position sizes until the market and your trading prove the sellers wrong. Sellers are in control for now.

Cheers,

Danny Deals