The Next Market Leaders - 11/30
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Markets exploded higher as Federal Reserve Chairman Jerome Powell delivered more dovish than expected comments this afternoon, signifying that the central bank may slow its pace of tightening as soon as December. In this business, you need to be able to change your opinion quickly based on what the market is telling you. Any bears that were short coming into today expecting the usual hawkish comments were likely squeezed out hard. Now what we want to see for a continued rally is a follow-through to close out the week strong, rather than participants selling stocks and indexes into strength.
What a difference a day can make! Today’s rally leaves many potential leading stocks in great spots, with some breaking out today, and many others just below technical buy points. I added positions near the end of the day in RMBS and SMCI. Upon continuation with volume tomorrow and Friday, I won’t hesitate to increase exposure, but as always when coming from cash, I will start small and scale up as positions start working.
For the first time I can remember since the beginning of the year, there are too many setups to fit in this letter. That’s a good sign in itself. I’ve reviewed the best ones below and added a Runners Up column with pivot points. Let’s get into it!
Index Update
The recent volatility is clear in our indicators as the indexes have oscillated around short-term moving averages and net highs/lows have been up and down. Still, the S&P-500 has remained steadily above a rising 21EMA after getting support there today, and with the market seeming to choose a direction, I will look for all of these indicators to turn green in the coming days.
The Nasdaq moved up with strength off of the 21EMA in blue and closed much higher on excellent volume today. It’s right up against the resistance area that it got rejected at a few weeks ago, so flipping this level would be a show of strength. It might not happen right away, and a few days of backfill after today’s huge move would be perfectly normal.
The S&P-500 moved up through the declining 200-day moving average on above-average volume today. It’s a great start, but now it needs to hold this level, and it’s coming up on a resistance area. Holding the 200-day MA would signal a long-term trend change, though the official “higher-high” level I’m watching is just above 4,300 on the daily chart.
Stock Updates
First Solar (FSLR) took a break after moving to new highs on declining volume, and sold down very close to the $160 level that I noted as a a buy area on Sunday. I would consider adding further on a strong move to new highs at $173.75.
Rambus (RMBS) moved up past the $38 buy point on a volume pocket pivot (higher volume than previous 10 red days), which is indicated by the lime green volume bar. I added it near the end of the day at the buy point with stops at $36.50, and would increase the position size on a move to new highs.
Impinj (PI) broke out of the flat box pattern and inside-day buy point at $124 on volume both yesterday and again today, where I noted it could be added with stops at $119. This is one of the highest relative strength growth stocks in the market.
Celsius Holdings (CELH) initially moved past the $110 resistance area on Monday, but unsurprisingly failed, as it had come up from near the bottom of the base without resting. It traded back above the breakout area today, and I would consider buying a strong move through $112 with stops around $108.
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!
Super Micro Computer (SMCI) again tested it’s 10-day moving average that has held since October, no doubt shaking out some traders in the process, and I started a position late in the day once it appeared to be holding this area. Stops at low of day. Could add if it tests $88-$90 again tomorrow as long as it holds the low.
Enphase Energy (ENPH) may finally be ready to follow FSLR into new highs. It has continuously decreased volatility into the $325 buy point, but still moves a bit choppier than I’d like. I’m watching for a high volume breakout, and I’ll be ready to protect my cost basis if there is a quick reversal.
AEHR Test Systems (AEHR) is a fan favorite semiconductor after moving up nearly 100% in the past two months. It’s digesting the gains quite well; sellers are drying up just below new highs at $27.10. That’s my buy point with stellar volume and tight stops around $26.50.
On Semiconductor (ON) has the characteristics of a cup-with-handle pattern and bounced off the 21EMA support today. It’s 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.
Sanmina Corp (SANM) gapped up after the latest earnings report showed 3 straight quarters of accelerating earnings, sales, and margins. Volume came in today for a volume pocket pivot at the 10-day MA. The buy point is a big move at $67 with stops at $65 if the indexes are holding up.
Target Hospitality (TH) took a few months to work out that 120% move on the left side of the chart, and now could be ready for more gains. It’s got a nice ascending base and great volume characteristics throughout. A high-volume move through today’s high at $14.56 is my buy point.
Runners Up:
GFS - $68
KLAC - $400
ACLS - $80
CF - $110
CEG - $97
That’s all for tonight! See you back here on Sunday night for an update on our stocks.