Markets continue to show encouraging signs of a major trend change as all indexes are currently trading above their 200-day moving averages for the first time in over a year. They are extended in the short-term, coming into another heavy week of earnings reports along with a Federal Reserve interest rate decision + press conference on Wednesday. It should be a fun one!

With the expected volatility, watch your stocks. There wasn’t a ton of participation from the high-quality issues in Friday’s rally, rather it was old leaders well below their all-time highs like TSLA, MELI, and SHOP buoying the indexes. This is a development to observe. I’m looking for potential new leaders to catch a strong bid, indicating institutional support for names at highs to lead a new bull market… that has not yet occurred on a widespread basis. Things could change in short order so I’m continuing to stay vigilant and ready increase exposure, while tightening up stops in case of a reversal in the opposite direction - watch out for the latter Wednesday with the Fed.

Many quality names are starting to set up out of short bases. These are the ones I’ll be monitoring closely this week. Let’s get into it!

Index Update

The Nasdaq enters next week Day +14 above the 21-day exponential moving average with Net highs/lows up and continuing to expand. This gives us clearance to increase exposure in leading stocks.

The Nasdaq traded up through the declining 200-day moving average on Friday and closed there on the highest daily volume since May. It has expended a lot of effort to get to this point, so a consolidation would be healthy, though not if it leads to high volume back down through support levels.

The S&P-500 moved up on high volume Friday, trailing the Nasdaq, and got halted right near the key resistance area of 4,100. This area signals a daily higher-high and confirms a new uptrend as far as I’m concerned. I wouldn’t be surprised to see some backfill to retest the declining trendline or moving averages.

Earnings and Macro

There are tons of earnings due out out this week in growth and mega-cap tech, make sure you double-check for any stock you own. Here are my highlights:

Monday: HLIT

Tuesday: SMCI, ALGM, CAT, XOM, AMD, SNAP

Wednesday: Federal Reserve release at 2pm, Conference at 2:30, ELF, GFF, ATKR, SLAB, META

Thursday: Initial Jobless Claims at 8:30am, MOD, ATI, DECK, WNC, WWE, SBUX, DGII, MCHP, AAPL, GOOGL, AMZN

Friday: Nonfarm Payrolls, Unemployment Rate at 8:30am

Stock Updates

Allegro Microsystems (ALGM) broke out nicely through $34 with good volume and closed up nearly 5%. It reports earnings on Tuesday so we’ll have to be out before then. I will be monitoring the earnings report/reaction and will add back if it’s positive as this one has leadership potential.

Caterpillar (CAT) inched up to new highs at $260, but volume was not heavy through the pivot point, and earnings are due out on Tuesday before the bell. Sticking out at least until then.

First Solar (FSLR) found support at the 21-day moving average and came back up through the $176 area, but the volume was nearly 40% below average. That’s not enough to get me excited about the stock with the Solar sector acting a bit sketchy. Keeping on the watchlist for a move to all-time highs at $185.

Best Setups

The setups below are ideas, not outright buys; placing a trade depends on the price action, volume, and general market. 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!

Arhaus (ARHS) is a home retail chain with earnings and sales growing at 59% and 57% as of the last earnings report. The stock put in a 30% move after gapping up a few weeks ago and is now consolidating just above the 10-day MA with an inside-day (white candle). I’d consider starting a position above Friday’s high at $13.65 with stops around $13. All-time highs at $15.

Amkor Technology (AMKR) is flagging just below all-time highs. The declining volume throughout the base is exactly what I want to see, but now heavy buy volume needs to come in through the $30.25 pivot. Earnings 2/13.

Axon Enterprise (AXON) is innovating Tasers for law enforcement and gapped up on high volume after the last earnings report. The daily chart shows the handle of a 62-week cup with handle, and on Friday it printed an inside-day, though volume was higher than I’d like to see. It might need a few more days and/or a shakeout, but the clear pivot is $195 on heavy volume.

Crocs (CROX) has gone on a big run after bottoming in July, back above all increasing moving averages, even if it’s still 50% from ATHs. It’s forming a short flag which I’d look to buy if there was a breakout with high volume. Otherwise I’ll keep watching for a base to form until earnings are reported on 2/15.

Diamond Offshore Drilling (DO) is shaping up and has group strength with oil and gas continuing to trade near all-time highs. It’s consolidating in a tight bull-flag after a good move which is a change of character for this stock. I’d consider buying a breakout at $11.90 with stops at $11.50 for a low-risk trade.

Lattice Semiconductor (LSCC) continues to base on low volume above the moving averages and very close to highs. I’m watching to buy when volume comes back into the stock, as on the right side of the chart. This one has excellent earnings numbers, group strength, and clear respect for the 50-day MA.

Credo Technology (CRDO) is a 2022 IPO with solid earnings estimates and printed a new high in RS last week on great volume, so I’m watching for it to set up again. It’s currently in a very short ascending triangle base, which could work if bulls really want to push it. A buy point at $17.55 with stops at $17 is a 3% risk trade.

Mobileye Global (MBLY) is a recent IPO that’s finding traction, with the 25M shares traded on the IPO day signaling interest in the stock. Thursday’s earnings report showed a 125% EPS gain on 59% revenue year over year. I’m watching for it to tighten up a bit to provide a better pivot point.

That’s all for tonight! 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.

Cheers,

Dan Dormody