The Next Market Leaders - 1/19
It’s been a tough week for bulls so far as the market appears to be in a definite downtrend. Most individual stocks are getting crushed with former leaders down 50%+ from highs and more recent leaders, particularly in semiconductors, breaking down too.
There’s been a lot of volatility for the quick trader and I’ve found myself selling positions much faster, for smaller gains than I’m used to. In this market, it’s either take quick profits/losses or get smoked. Best for most to have a high percentage of cash until conditions improve.
Tonight we’ll cover updates on some of the oil stocks from Sunday’s issue and precious other long setups, but there are barely any longs to consider as most charts will need more time to recover. There are many stocks setting up for short but the market is a bit too oversold too consider opening now. Let’s get into it!
Index Update
On Sunday, I noted that the Nasdaq was still weak and that it had not dipped below the 200-day MA since April of 2020. It cruised through the 200-day on Monday with little support, so we should see much lower prices in stocks. No bottom in sight for now, but I wouldn’t be surprised to see a short-term bounce back up to the 200-day in white. This would provide a better entry for new short positions.
The S&P 500 broke through its 15-month ascending trendline on high volume, which is quite significant, and looks headed down to the 200-day MA at least.
Here’s the weekly chart so you can see the full extend of the breakdown:
Portfolio Update
YTD Return: +5.76%
YTD S&P-500: -3.97%
7-Day Return: +4.95%
Recent Moves
BROS - Shorted at my $43.50 sell point from Sunday’s issue.
TQQQ - Bought for a bounce play but sold for even as it sold back down.
My Positions
PayPal (PYPL) sold down below my noted support area and I short-sold it just below at $181. Buy-stops even at $181. Will close out if the market is bouncing hard.
Dutch Bros (BROS) sold down today below my noted short area of $43.50 on high volume. It’s already down 5% so I took half profits and moved stops on the rest to even.
Alpha Metallurgical Resources (AMR) is up 4% from my buy point after the cup-with-handle breakout and I took half the position off to lock in profit at $71. Stops up to even at $66.50. I’ll add more to the position if it breaks above $73.
Best Setups
Danaos Corp (DAC) was in the Jan 2nd newsletter and yesterday passed my updated buy point of $76.50 on 2x daily volume. I passed on it as the market was getting hammered. I didn’t think it would hold up, but it’s 6% higher. This was an early entry of the potential cup formation, so I’ll keep watching for another entry.
Pioneer Natural Resources (PXD) is a monster that’s up 11% from my $197 buy point but I missed the entry. I’ll continue to watch this for another entry point as it’s too extended to buy here.
Occidental Petroleum (OXY) is passed the 52-week high at $35.80, and today it held that level. I may look to buy if it right here if this level holds with tight stops $0.50 below my buy. A few more days rest might be better.
Viper Energy Partners (VNOM) is another oil stock with excellent volume characteristics that’s holding up well. I noted a breakout buy point of $26.80 last issue, but didn’t take it. Now I’m looking for a few days consolidation or I might consider a move above $27.30 on high volume.
Freeport-McMoran (FCX) is a copper/silver/gold miner and the sector shows great strength. It has formed a cup buy point of $46.30 on high volume with stops $2 lower. Here’s the weekly chart for the best picture as this stock trades a bit choppy.
Short Opportunities
I’ll look to short some of these stocks after a market bounce - the market is just a bit too extended at this point to open up new short positions. The thing about shorting is that bounces/squeezes can move against you quickly and blow out your stop losses, so in my experience it’s been much easier to stop out. Thus, with shorting:
Be aware if the market is extended to the downside. That might mean it’s due for a nice bounce/temporary short squeeze, so be careful opening new shorts.
Insist on high sell volume as the stock passes below your sell point as stock sellers can cascade quickly if the price continues lower with momentum.
Fortinet (FTNT) is a cloud security stock that hasn’t broken down too hard yet, and is forming a bear-flag, a pattern that has played out wonderfully in numerous other stocks the past few weeks. The sell point is a move below $303 on high volume with buy-stops $6 higher.
Chegg (CHGG) is from Sunday’s issue and crossed through my sell point of $28, but I noted for high volume and the volume was weak through the sell point. I passed on it.
DoorDash (DASH) is also forming a bear flag with a sell point below $125 on heavy sell volume. Stops $3 higher.
Arqit Quantum (ARQQ) is a relatively recent IPO that looks super bearish. The sell point is a move below $16 but the volume needs to be high.
Yellow Corp (YELL) is a trucking/transportation company that’s been selling down as rising oil prices mean higher costs and lower profits. It’s breaking the bear flag right here around $10.75 but I’m careful of a market bounce so I might wait a few days unless there’s very heavy volume through the pivot.
That’s all for tonight! If you liked this column or have any feedback about the content, hit me up on Twitter with the link below or respond to this email.
See you back here on Sunday night for an update on our stocks.