The Next Market Leaders - 12/22
The markets have snapped back this week after Monday’s apparent sell-off through support got everyone bearish. Now the bears are in disbelief as stocks have been rallying, albeit on lighter volume, and it looks like investors are piling back in for a Santa rally. Tomorrow will be telling as it’s crucial for the indexes to hold their current levels and follow through after a strong close today.
There are several stocks setting up buy points and the few that have already broken out appear to be succeeding so far. It’s still a good time to be cautious with overzealous buying but it’s okay to buy stocks that are breaking out of valid bases with tight stop-losses. Fast money management is the name of the game at the moment. Let’s get into it!
Index Updates
The Nasdaq undercut support on Monday and immediately rallied back, which as trading legend Ryan Piermont pointed, could actually be quite bullish:
@Ignorant_Invest @dannydeals_ @Trader_mcaruso I wouldn’t say “uh oh”. Desc tri’s “can” lead to the most explosive, rip your face off moves you can imagine. Especially when they undercut support and reclaim. Arguably my favorite pattern, even more so than HTFs. This one still has work to do but be open to anything.
The index continued upward yesterday and today, but on lower volume, which might be attributed to many market participants being on vacation this week. In any case, the Nasdaq closed very strong above a triple threat of resistance including the 21-day MA, 50-day MA, and a descending trendline. If these levels hold, we could be looking at the start of new rally (after volume comes in to confirm).
The S&P-500 closed strong today and is just over 1% away from all-time highs. Watch how it acts around the resistance area to see if it gets rejected again or the third time is a charm to break through.
Recent Moves
UNH - sold the rest for ~4% profit as it fell to my $479 stop Monday
TSLA - bought today at $985 and added at $995, up 2%
TOL - bought today at $69.54, up 2%
MU - bought today near end of day at $89.93, up 1%
Current Positions
Toll Brothers (TOL) came back up through it’s prior support area and I bought some on the way up at $69.54 with stops placed at $68.44. Will consider moving stops to even quickly.
Tesla (TSLA) rallied today on news that Elon is done selling shares. I bought it as it came back up through the former support area around $980 in white. Looking for it to break above the 50-day MA in yellow and then test the descending trendline. Stops at $976.
Micron Technology (MU) posted a great earnings report and sales outlook two days ago, then it gapped up through the cup-with-handle buy point of $89. I bought some today on the inside-day continuation pattern just below $90 with stops at $88.76. Good risk/reward here.
Best Setups
Alcoa Corporation (AA) notes from Sunday’s letter: “A quick trader could pick some up here at $53.73 or a bit closer to $53 and add more on a break of $57.75 (or sell if it fails to break this higher resistance).”
It dipped Monday where you could’ve picked some up and then flew out of the gates on Tuesday/today. I missed this one as I didn’t expect the strength through $57, but congrats if you did grab it as it’s up 12% from my first buy point and 3% from my second buy point. I’ll be watching for a dip entry.
Ciena (CIEN) passed through my buy point of $75.50 but I noted for heavy volume and the volume was quite light today so I passed on it for now. If you got in, place stops $2 below your buy.
SMART Global Holdings (SGH) finally passed through the buy point of $63.75 cleanly and closed at the high of day. Place stops $1.50 below your buy if you got in. I passed on it but I’ll look for an entry closer to $64 with a tight stop if it comes back down.
Aehr Test Systems (AEHR) is a hot name in the semiconductor sector that’s been acting well on volume this week. The buy point is a break up through the 50-day moving average at $20 on heavy volume. Use a smaller position size and add to it if it breaks the descending trendline around $22 but this might need some time to consolidate up the right side.
Arista Networks (ANET) is coming back after its breakout failure last week. The new buy point is a move through $140.50 on high volume.
Silicon Motion Tech (SIMO) is forming a new base with a buy point of $91 on high volume. I’ll also look to buy an undercut and rally play if it goes back down to the support zone in white at $83.
Bridge Investment Group (BRDG) is one from Sunday’s letter where I noted that I wouldn’t be surprised to see it fall back into the base and consolidate further after it broke out Friday. After falling back in, it looks ready to go. You could pick some up right here around $23 or a bit lower would be best, with stops $1 lower.
CubeSmart (CUBE) has been setting up a nice base pattern with a buy point of $57.75. It’s in the self-storage REIT space which has been hot lately and could be a trend going into 2022.
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. Markets are closed on Friday so enjoy the holiday!
Cheers,
Danny Deals