The Next Market Leaders - 1/9
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A brutal week for growth stocks to kick off 2022 as the Nasdaq sold off more than 4% and many stocks are under distribution. Energy/oil and banking are the clear leading sectors and the only groups worth buying with the market as shaky as it is.
That being said, cash is still the best position to have in order to avoid getting chopped up by current volatility until the market establishes a clearer trend. If a stock sets up according to my buy criteria, I’ll be using a smaller position size (10% portfolio max) to manage risk until new buys provide better feedback.
Let’s get into some stocks!
Index Updates
The Nasdaq sold down hard on high volume last week and is sitting right above a big support area where it has bounced twice in the past few weeks. The area has held up, for now, but if it breaks below it then it looks headed for the 200-day moving average in white.
The S&P-500 held its 50-day moving average on Friday and fared slightly better than the tech-heavy Nasdaq last week, but there’s still a lot of selling distribution on this index as you can see below. Look for it to hold this support or it’s headed down to the ascending trendline in orange.
Recent Moves
DOCS - Opened short position at the $49 sell area from last Wednesday’s issue and covered it for a 5% gain
OKTA - Covered short position for 4% gain
NUE - Sold for break even when it sold down Thursday after being up 5%. This market is for very quick profit (and loss) taking.
My Positions
No holdings coming into the week - 100% cash.
Best Setups
There are precious few setups that look ready to go right now as most stocks need several days or weeks to recover and create new patterns. That’s a signal that cash should be your highest position and to be careful jumping back in too quick.
Cenovus Energy (CVE) is a setup I tweeted out last week as it’s a leader in the oil & gas space. The last few days have been showing big accumulation of shares after a shakeout of the recent support around $11.50, which is great to see. Relative strength on the bottom is at new highs. The buy point for me right here around $13.75 or lower around the $13.50 support might be better. Max stops at $13.
Pioneer Natural Resource (PXD) is another leader in oil & gas and has a very similar pattern to CVE. This one was high on the list of institutional buys last week which was clear by the big above-average volume bars for the past 4 days. The buy point is as close to $197 as possible if it returns to support or you can try it at new highs past $200 on heavy volume. Stops $5-$6 below your buy.
Alpha Metallurgical Resources (AMR) is a coal developer that’s forming a cup-with handle pattern after a big rise last year. A few more days developing the handle would be best and then the buy point is a move above $66.50 on heavy volume. Stops $2 below your buy.
Wells Fargo (WFC) is extended from its buy point, as with most stocks worth owning in this sector at the moment, but keep this one on your watch this as it’s a leader in banking. I’m watching for a new buy point to develop.
That’s all for tonight! If you liked this column or have any feedback about the content, hit me up on Twitter with the link below or respond to this email.
See you back here on Wednesday night for an update on our stocks.