After a strong showing on Wednesday, markets consolidated and closed nearly even despite a big gap down on Friday morning's job numbers. I noted in premarket that it felt like an overreaction, and that turned out to be the case as participants bought the dip throughout the day. That’s a good sign.
The overall environment has remained difficult for traders, and I haven’t seen much progress in my account over the past few weeks, but with a few open positions ready to take off and the market slowly but surely improving, I’m gearing up to capitalize on the opportunities ahead. There aren’t too many economic events this week so the market should be allowed to work without too much chop.
Many leaders we’ve been monitoring showed their strength last week (including ENPH) while others could be close to moving up and out of base patterns. I’ll review those below. Let’s get into it!
The S&P-500 has remained steadily above a rising 21EMA, and is back above the short-term moving averages, with net highs and lows pointing upward for two days straight. One more day of net highs and all of our indicators will be green.
The Nasdaq is knocking on the door of the resistance area and recovered after a big gap-down on Friday. The 50MA is turning up, though it’s still below the falling 200-day MA. Look for price to flip the resistance area while continuing to hold the 21EMA.
The S&P 500 held the 200MA as support after gapping down on Friday, which is exactly what we want to see. Look for this level to continue to hold, and as long as it does, this index looks positive heading into the end of the year.
Enphase Energy (ENPH) broke out to new highs on Friday on 145% average volume. It closed 3% above the $325 buy point. I wouldn’t be surprised to see a return to the breakout area in the coming days, but it should get supported there by investors who missed the move. I’d look to add on any pullbacks.
Rambus (RMBS) moved up past the $38 buy point on a volume pocket pivot, and held that area as support on Friday. I would increase the position size on a move to new highs at $39 with volume. Stops at $36.50.
Celsius Holdings (CELH) was choppy around the $110-$112 breakout area, and closed higher on average volume Friday. It printed a new high in relative strength as well. A move above $118 would signal new highs - I’d look to buy that if it moved through cleanly and with stellar volume.
Impinj (PI) broke out of the flat box pattern and inside-day buy point at $124 on volume, but came back down to tight stops at $119. I’m continuing to watch this one.
Sanmina Corp (SANM) traded up through the $67 resistance area on good volume, but now it needs to follow through. Keep stops at $65 for now.
Super Micro Computer (SMCI) broke the 10-day moving average and stopped me out. It could bounce off the 21EMA, but a bit of consolidation in this name wouldn’t hurt. I’m watching for a break of the short descending trendline or for another buy point to materialize.
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!
First Solar (FSLR) is the other leader in solar, and interestingly, it stayed in its base pattern while ENPH broke out. I think that either this one breaks out soon or ENPH fails. After an inside-day on Friday, it’s showing a clear buy point on a strong move through $174 with stops at $167.50.
KLA Corporation (KLAC) is a semiconductor stock with accelerating earnings and sales, and it has respected it’s 10-day MA since moving up 40% off the bottom. It’s now flashing a buy point at the psychological $400 level. Watch for high volume above the pivot point or it could fail on the first try.
Axcelis Technologies (ACLS) is another semiconductor with a similar pattern showing relative strength, though the volume in this leaves a bit to be desired. Watch for a high-volume move through $81 on the daily chart and add above $84 on the weekly chart.
AEHR Test Systems (AEHR) is a fan favorite semiconductor after moving up nearly 100% in the past two months. It wicked up through the $27 buy point on slightly above average volume, but failed in short order, likely testament to the number of eyes on it. I’m watching for another breakout above $27 where it could work the second time.
Elf Beauty (ELF) has been a leader for the past 5 months or so and is finally setting up a short consolidation after the power earnings gap on 11/3. Let’s see if volume can come back into the stock to the upside. I’m watching for a high volume move through $56 with stops at $54.5. It might need a bit more time.
That’s all for tonight! I love to hear from you all, so 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.
hi Dan, huge fan of your work & thanks for doing what you do :) just curious, do you rule out certain stocks as new adds given how extended it might be? and are you using Marketsmith to scan for these