The Next Market Leaders - 12/12

The major indices rebounded last week but the market breadth of those advances was not great, with just a few stocks advancing and most selling down.

Apple was the big winner of the week, finishing up 8% and pulling the Nasdaq/S&P up with it. A few other stocks broke out as well but many others are failing their buy points and some are selling down aggressively underneath the covers. It’s still time to be patient and wait for a follow-through day on the indices (up day on higher volume than the day before) to confirm the uptrend is resumed before buying new positions full-size.

The Fed reported the Consumer Price Index on Friday at 6.8%, a wildly high reading, but it seems as though markets were expecting higher as they closed near the highs of Friday’s session. With the Fed meeting upcoming this Wednesday, expect a few choppy days of trading with direction ultimately decided based on Jerome Powell’s comments on inflation, faster tapering, and interest rate hike guidance for 2022. Let’s get into it!

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Index Updates

The Nasdaq Composite was unable to close above it’s 21-day MA and decreased in volume from Tuesday onward. This looks bearish to me, but we’ll watch for a break of the 21MA and the descending trendline in orange.

The S&P-500 is less than 1% away from all time highs but expect some resistance at these levels.

Recent Moves

• Bought F at $20.90

• Bought UNH at $468

• Bought RMBS at $28

• Bought and sold ODFL for no loss

• Stopped out SQQQ for a 2% loss

• Bought and stopped out of ZIM for a 2% loss

Current Positions

Ford (F) bought this at $20.90 after noting on Twitter Friday morning that my buy point was $20.80. It rocketed past the buy point on Friday afternoon and closed at the high of day. Looks good to move higher but I’ve already moved my stop-loss to the breakeven point as many breakouts are failing and auto-stocks as a whole haven’t been thriving (TSLA).

Stop-loss: $20.90

UnitedHealth Group (UNH) is a slow-mover in the Dow but I picked some up as it moved through the buy point around $467 last week. Volume looks good and it closed at all-time highs Friday.

Stop-Loss: $463

Rambus (RMBS) I noted a buy point at $28 last week and it crossed through on Tuesday on high volume. I’d take most off the table early if chips are selling down so keep an eye on NVDA as it leads this sector.

Stop loss: $27.80

Best Setups

Below are the best looking stock setups at the moment. I’m planning on mostly sitting on the sidelines until the Fed meeting on Wednesday afternoon as I expect trading to be choppy leading up to that. I will buy smaller positions in these setups if they move through the buy points on heavy volume.

Louisiana ​Pacific (LPX) formed a 7-month cup with handle pattern, and I tweeted out the setup when it broke the buy point at $74. It’s $3 higher already. I passed on this one but if you took it, raise your stops up to breakeven.

Denbury (DEN) held its 21 and 50-day moving averages and has been trading in a tight range for past few days. The buy point for a starter position is $85.50 if the market is holding up with stops $2 lower.

Arista Networks (ANET) traded back up above its 21-day MA and looks ready for higher prices if the market holds up. Buy Point is $134.50 on high volume with stops at $132.

GMS is an interior construction products company with accelerating earnings, revenue, and after-tax margins. Here’s a snapshot of their most-recent quarterly results reported 10 days ago:

Buy point is $62 on heavy volume with stops at $60.

Micron Technology (MU) is building the right side of this cup base pattern and the buy point is a break of $86.50 on great volume. Here is the weekly chart:

Snowflake (SNOW) is holding up well considering many software stocks are selling off. If the market is holding up (and only after the Fed meeting), the buy point is $379 for a starter position and add more on a break of $406.

Dominos Pizza (DPZ) has formed a cup-with-handle pattern and a buy point of $550 on solid volume with stops at $535.

Nvidia (NVDA) sold down below it’s 21-day MA on high volume. There’s a lot of distribution that’s happening here as it’s been churning on high volume for the past few weeks but not going up. I’m staying away from this one but keeping an eye on it as the whole semi sector (which has been leading the market) may follow its path.

That’s all for tonight! Good luck this week and remember to respect risk. See you back here on Wednesday night where we should have some more setups after the Fed meeting.

Cheers,

Danny Deals