Hey everyone - another fun week in the markets. It’s been electric to watch the action in the early week. Stocks started out Monday by bouncing off of Friday’s lows, only to get crushed again today on high volume.

There only are a small handful of growth stocks acting well, mainly in Electric Vehicle, Semiconductor, and Metaverse sectors.

Futures are pointing up about 1% tonight which points to another bounce tomorrow and further volatility ahead. Whatever happens, these conditions are treacherous for traders like me, so I’ve been sitting in mostly cash and watching the action with a bowl a popcorn. If I enter a new position, I will do so with a much smaller position size than I normally trade. Breakouts are failing left and right, so I’m not looking to rush back in right now.

Let’s get into index updates and a few setups to watch.

Index Updates

The Nasdaq played out near exactly as I expected. From Sunday’s report: “The 21MA purple line around 15,800 will be the next resistance that might give it some trouble.” It traded right up to the 21MA in purple but wasn’t able to close above it, and the daily volume was low. That signal served as a warning for the carnage today and it kept me in cash.

This index looks headed for the 50MA in yellow.

The S&P-500 notched it’s 6th distribution day in 6 weeks today, and there was particularly high selling volume. This is a warning for more selling to come and lower priced. Looks headed for the 50MA which should serve as support around 4,500.

Recent Moves + Current Positions

No moves since last week. 100% Cash.

Best Setups

Electric vehicles are holding up incredibly well.

Li Auto (LI) reported a 288% earnings surprise of $0.05 per share, higher than expected auto delivery numbers, and 226% revenue growth in their earnings report on Monday.

It’s showing good relative strength by gaining over 2% today, and it’s been forming a 4-month base that could break out in time. The Buy Point is $36.75 on great volume if the market is acting well.

XPeng (XPEV) is another EV stock that’s acting well and building a super base. Here’s the weekly chart with a conservative Buy Point of $60.50 and stops $2 lower.

Advanced Micro Devices (AMD) passed through our Buy Point on Monday but the volume wasn’t there so I passed. We’re looking for higher volume through the buy point. It closed just below the $159 pivot today.

Ambarella (AMBA) is another chip stock that reported fantastic earnings today after the close. Their earnings came in at $0.57, $0.32 above analyst estimates and 533% growth year over year. Their revenue grew 64%.

The stock traded up 13% after-hours just below the Buy Point of $207. A few days of rest would be best before breaking to all-time highs as I don’t buy stocks that are up over 10% on the day at resistance. Stops at $199 if you enter.

Sitime Corporation (SITM) crossed above our Buy Point on amazing volume (2.9M shares traded vs. 400k average), but stopped out today in the market sell-off. A move into new highs at $320 would be best for the next buy.

That’s all for tonight. Good luck to everyone for the rest of the week - remember, keep new buys small until the market shows us definite confirmation of resuming it’s uptrend. Until then, exercise your sit-out ability and wait until the risk/reward improves.

Cheers,

Danny Deals