The Next Market Leaders - 1/26
Markets have been unforgiving this week, whipsawing with volatility in both directions as they look for a short-term bottom. Stocks have been in oversold territory since last week.
The Fed meeting today left interest rates unchanged for now, but Jerome Powell remained hawkish during the Q&A, where the market might have been expecting more dovish tones after the recent selloff. The indexes sold down from up +2.5% to slightly down on the day after his comments. Nonetheless, now that the Fed meeting is in the rearview, stocks might see a reprieve of selling in the short term.
Almost all charts are busted up and need more time to develop proper buy points, though the quick trader has some oversold bounces to play with. Today we’ll cover the one sector that looks worth buying right now, energy, along with a few other stocks.
Index Update
The Nasdaq has been getting crushed and is still looking for a bottom. An oversold bounce might bring it back up to the resistance around 14,200 or up to the 200-day moving average in white.
The S&P-500 fell below its 200-day MA but found temporary support at a key area around 4,280. Look for it to regain the 200-day with strength.
Portfolio Update
YTD Return: +5.03%
YTD S&P-500: -8.60%
Recent Moves
APA - Bought at $31.61
DVN - Bought at $52.16
TQQQ - Bought today after FOMC and got stopped out for a 4% loss
SOXL - Bought today and stopped out for a 3% loss
My Positions
Cash: 70%
APA Corporation (APA) is a leader in energy and I bought it at $31.50 yesterday before it went on to close $1.50 higher. It’s up 5% so far with stops at $30.18.
Devon Energy (DVN) is another leader in oil & gas that I picked up today at $52.17. It closed just below my buy point.
Best Setups
As mentioned earlier, energy is the one sector that looks worth owning right now, and that’s because crude oil futures (below) are breaking out of a bull flag to 52-week highs amid several macro tailwinds. This can drive energy stocks much higher if the move is sustained.
DVN and APA are my favorite in the sector, but let’s cover a few others:
NRGU is a 3x leveraged oil ETF that looks good to buy on a break above $280 with stops $10 lower. A few more days of consolidation might be best before breaking out.
ConocoPhillips (COP) held up well in the brief oil selloff a few weeks ago as evidenced by the flat base pattern, and then broke out cleanly to run up 16%. It’s now consolidating again and looks ready to break out above $89.50 on heavy volume.
Occidental Petro (OXY) is showing great accumulation characteristics with the up days on big volume and down days on lower volume. I’d consider it if it came down a bit closer to $36 with stops $1.50 lower.
Now let’s move on to other stocks.
AbbVie (ABBV) is showing signs of accumulation as it’s building a flat base pattern after a decent gain. There was an undercut to the pattern on Monday which is good to shake out weak holders. The buy point is a move above $138.50 on high volume with stops $4 lower.
Tricida (TCDA) is another drug manufacturer and is showing excellent relative strength in this market. It tried to breakout today but got slapped down as the market sold off. I’d consider it on another break above $10 on high volume with stops $0.50.
That’s all for tonight! Most stocks need more time to create new base patterns after selling off, so perhaps we’ll have more to cover on Sunday.
See you back here on Sunday night for an update on our stocks.