The Next Market Leaders - 1/23
The market sold down aggressively last week as the Nasdaq finished down a whopping 7.5%, the largest weekly rout of the index since March of 2020.
I hope you preserved your capital as I noted in the last issue that it was best to have a high percentage of cash until conditions improve. I also noted several short positions that played out well including PYPL down 10%, DASH down 7%, and FTNT down 5% from my sell points.
This week, Federal Reserve meeting notes get released on Wednesday at 2pm EST, and a slew of companies report earnings including names like MSFT, TSLA, AAPL, and KLAC, so expect a choppy week. I’m not sure where the bottom will be, but I expect a short-term bounce as the market is very oversold here. Futures are up 1% tonight pointing towards a bounce tomorrow, so tonight I’ll cover a few bounce opportunities if it plays out. Most stocks need more time to set up.
Index Update
The Nasdaq sold down convincingly last week on heavy volume and looks extended on the downside here. I expect a bounce shortly but need to see buyers come in as zero buyers showed up last week.
The S&P-500 sliced through it’s 200-day moving average and closed at lows. It’s now down nearly 8% on the year. Look for it to retake the 200-day MA.
Portfolio Update
YTD Return: +6.39%
YTD S&P-500: -7.73%
7-Day Return: +2.12%
Recent Moves
AMR - Stopped out on remaining long position to average a 5% gain on the trade
DASH - Sold-short at $285
FTNT - Sold-short at $303 and closed most at $300 for a small gain
NVDA - Bought at trendline support ~$240 Friday, nearly stopped out
My Positions
PayPal (PYPL) is down over 10% from my $183 sell point. I covered most on Friday around $167 for a tidy gain. Holding the rest with buy stops at $174.
DoorDash (DASH) hit my sell point on Friday and I noted on Twitter that I shorted it at $125. I covered most around $119 for a small gain. Stops to even on the rest.
Nvidia (NVDA) looked good for a bounce long midday Friday at $240 as I thought more short-sellers would cover going into the weekend. Instead, the opposite happened and it sold down further, but it didn’t hit my $232 stop so I’m still in for now. Will look to offload into a bounce if I don’t get stopped out first.
Short-Term Bounce Setups
Nearly all stocks need more time to recover and form new base patterns after getting sold off over the past few weeks. Short opportunities are extended beyond their sell points and those late to the party might get squeezed soon, so I’ll only be considering new shorts after a good bounce. Most should be in cash until conditions improve materially as getting involved too early can get you chopped up. However, for the quick trader, here are a few ideas, which I will consider with smaller positions if the market bounce is convincing (i.e. holding the gap up tomorrow on high buy volume and accelerating in the first 30-45 mins tomorrow and beyond). These are more nuanced plays so don’t take them if it’s not your style.
Ambarella (AMBA) is sitting right at its 200-day MA and I’d consider some around here on a bounce with tight stops at the lows at $134.30.
KLA Corp (KLAC) is another semiconductor stock that got beaten down last week and I’d buy some on a move up through $381.75 for an undercut and rally. Stops just below the lows at $370.50 for a 3% stop loss. Reports earnings on Thursday so I’d definitely be out before then.
Ford (F) failed its ascending triangle and would’ve been a good short from that $24 area but I didn’t take it. Now it’s breaking below its 50-day MA so I would consider buying on a break above $21 with a stop at $20.50 for a 2.5% risk.
RingCentral (RNG) can bounce as well and provide a good risk/reward at this spot. If the market is bouncing, you could pick some up around here with a stop at $164.50 and a target of $190 for a quick trade.
That’s all for tonight!
Be sure to check my Twitter (@dannydeals_) for real-time alert and updates. Otherwise, there should have more stocks to consider by Wednesday’s issue, even if just for shorting. Talk to you all then!