The Next Market Leaders - 1/2
Welcome to all of the new subscribers and to the first issue of 2023! Hope you enjoyed the holiday weekend.
Markets closed out December near year-to-date lows, a fitting gesture for what was a tough 2022. As we enter the new year, watch for the “January Effect”, a seasonal period of positive performance driven by investors reentering the market after December’s tax-loss selling. Currently, the market trend is down on all time frames, so I’ll be watching for a change before entering long positions for the first time this year.
Oil and gas stocks, along with a few in biotechnology, are in the best technical position coming into the year, and many have tightened up nicely after the low-volume holiday period. I’d be very selective on new buys and careful with stops/position sizing while the trend remains down, but I’ll cover several stocks below that have set up with low-risk pivot points. Let’s get into it!
Despite being a new year, it’s the same market. All of our market trend indicators are red as the S&P-500 closed Day -11 below the 21EMA with net highs/lows down for 19 days straight. This signals strong caution on long positions.
The Nasdaq closed near year-to-date lows and down 33% on the year. It's below all declining key moving averages, but it’s in an area which has acted as support in the past few months. We’ll see if buyers come back in now that tax-loss selling is over or if this index leads to new lows.
The S&P-500 is remains below the rising 50-day MA and all other moving averages. As you can tell, this index has quite a bit of overhead resistance with the MAs and 12-month descending trendline, and not too much support below. It seems as though the path of least resistance is lower, but we’ll just have to wait and see.
No updates tonight.
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!
Schlumberger (SLB) is a major player in oil and gas field services and has held most of it’s recent gains from the $40 breakout. It’s now consolidating in a tight range on low volume, just above the key moving averages as a launch pad. The pivot point is a high-volume move through $54 with stops at $52.
Helix Energy Solutions (HLX) is another oil and gas field services stock with great price and volume characteristics. Look at the high-volume 50% move on the left side of the chart followed by a low-volume consolidation through the base. Now buy volume is coming back in just below all-time highs, and sellers are scant. The pivot point is a move through $7.50 with stops at $7.17.
Weatherford International (WFRD) has big volume coming into the stock and is potentially flashing a second buy-point after the breakout. Though it might be more extended than the others, watch for a move through $51.75 on heavy volume. It could also be added on another test and hold of the $49 area with tight stops.
Titan Machinery (TITN) gapped up on the highest volume in a year (white dot) after reporting excellent earnings results to the tune of 91% EPS growth and 47% revenue growth. It’s consolidating in a tight range and printed an inside-day on Friday. I’d consider a breakout through $40 with stops a $39 for a low-risk trade.
That’s all for tonight! If you have any feedback or questions, just reply to this email or hit me up on Twitter.
See you back here on Wednesday night for an update on our stocks.