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Markets picked up where they left off in 2022 with choppy action in the indexes and volatility around pivots leading to failures much more often than not. It remains a low-probability market. Futures are currently pointing to a gap-down tomorrow.
The direction has yet to be decided this year, but breadth and market internals slightly improved today with net highs continuing on the NYSE and just barely starting on the Nasdaq. I’m in no rush to get involved yet. Setups are failing and the indexes are looking slightly ominous at make-or-break levels. With risk high and no real conviction one way or the other, I’ll be sitting out in absence of an excellent signal. Remember, in bear markets, the main goal is preserve capital rather than maximize gains.
There aren’t many setups at or near buyable positions, so I’ll only cover a few in addition to updates on the indexes and the key levels I’m watching. Let’s get into it!
The Nasdaq remains just below both moving averages, but net highs/lows ticked positive today. That’s a good start, but let’s see if it can continue to hold support and regain the 21EMA in the coming days to start a new cycle.
It’s finding support around last year’s lows, or putting in a mini bear flag below all key moving averages. Volume did come in today and closed higher, vs. yesterday’s average volume, so that could be a clue. Watch for the flag to hold as support and for the 21EMA to be tested as resistance.
The S&P-500 looks like a bear pennant with lots of potential overhead resistance. The top pennant line coincides with the 21-exponential moving average, so I’m watching to see which level will break first to determine a course of direction.
Titan Machinery (TITN) put in an outside-day on above-average volume after the inside-day. It wasn’t too difficult to avoid at the inside-day pivot: the general market unsurprisingly faded after gapping up. It printed another inside-day today, so I’ll be watching for volume to come in above that, but it trades thinner than I’d like to see.
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!
Catalyst Pharmaceuticals (CPRX) is one of the few biotechs with real sales and earnings growth, and their numbers are impressive:
The stock has enjoyed a 100%+ move over the past 6 months and is flagging above the 21EMA. There have been a few similar setups in the market that have failed over the past few days, but I’d consider it if high volume comes in above $19 with the market improving.
Elf Beauty (ELF) is one of the brightest spots in the market, consolidating after a big move from it’s recent power earnings gap on 71% EPS growth. It’s setting up a clear pivot point at $57, but it’s ability to push past that and beyond depends on the health of the general market. Keeping this on the radar.
That’s all for tonight! If you have any questions or feedback, just reply to this email or hit me up on Twitter.
See you back here on Sunday night for an update on our stocks, when hopefully we will have more setups to cover.