Markets rallied further today as Powell was apparently less hawkish than expected despite noting that “ongoing rate increases would be appropriate”. Today saw the most new highs in stocks since 12/28/2021 and many of our setups triggered with volume, including ALGM up 16% after earnings, MBLY up 15%, LSCC up 6% and more. If the market can continue, these leaders could just be getting started.

On Sunday I mentioned that “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 is what has occurred this week thus far. Admittedly, it was tough to get positioned with size given the quick moves before and around the Federal Reserve today, but hopefully you got some exposure in at least 1-2 names.

The recent market rally does not mean you can abandon risk management. In fact, it’s more important than ever to adhere to your system, not chasing extended stocks and keeping stop losses to a minimum. There will be more places to buy if this rally has legs, and at this point, I’ve seen more than enough evidence to buy stocks coming out of proper bases with size. Still, be ready to protect profits or take quick losses in case of a reversal.

Tonight I’ll update on many stocks that crossed buy points and a few setups to watch closing out the week. Let’s get into it!

Index Update

The Nasdaq closed Day +17 above the 21-day exponential moving average with Net highs/lows up and continuing to expand. As I mentioned earlier, today had the largest number of Highs since 2021.

The Nasdaq powered back up through the declining 200-day MA after fading below it on low volume Monday. It up traded through Friday’s high on stellar volume. The cluster of buy volume over the past few weeks on this index is incredibly positive and hard to ignore. That doesn’t mean it’s going straight up from here; I expect the 200-day MA to be retested over the next few weeks.

The S&P-500 traded up through the daily higher-high at 4,100 on well above-average volume. We have been watching this level for weeks as a confirmation of a new uptrend. I’d like to see it hold this week rather than quickly getting rejected. The moving averages are forming a nice confluence and should be turning up, in order, shortly.

Earnings and Macro

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

Arhaus (ARHS) is a home retail chain with earnings and sales growing at 59% and 57% as of the last earnings report. It moved up through the short flag with an inside day high at $13.65 and closed about 6% higher today. All-time highs at $15, at which point I will add on a breakout.

Allegro Microsystems (ALGM) is one I noted “I will be monitoring the earnings report/reaction and will add back if it’s positive as this one has leadership potential”. It showed up in a big way on Tuesday, and flashed two terrific opportunities to add the stock (the retest of the ATH pivot and first pivot at $34). You had to be quick, but the huge volume coming in was a dead giveaway. Keep watching this for another buy if you didn’t get in.

Credo Technology (CRDO) is a 2022 IPO with solid earnings estimates and is showing up with volume at highs. It crossed up through the buy point at $17.55 on outstanding volume this afternoon. Stops just below $17.

Mobileye Global (MBLY) printed two inside-days in a row before moving back up through the $37 pivot point. It’s up nearly 10% in blue sky territory. It was hard to add this one before the Fed, so I will continue to watch it for another buy point, perhaps on a test of the 10-day MA in the coming weeks.

Lattice Semiconductor (LSCC) had volume come in above the pivot point this afternoon and closed up over 4%. This one has excellent earnings numbers, group strength, and clear respect for the 50-day MA. Stops just below $76. Earnings 2/13.

Diamond Offshore Drilling (DO) has group strength and after consolidating in a tight bull-flag after a good move, which I noted was a change of character, it moved up and out on 240% average volume to close 3% higher. Keep stops at $11.50. Earnings 2/6 so I’d take quick profits.

Crocs (CROX) traded up through the short flag, but volume wasn’t great and other names were moving much better, so I avoided it. Watching for volume to come back in above $127 or I’ll keep watching for a base to form until earnings are reported on 2/15.

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!

Amkor Technology (AMKR) is a semiconductor flagging just below all-time highs. Declining volume throughout the base ended with a volume pocket pivot today. I will add this one with size if we get a strong move above $30. Earnings 2/13.

Rambus (RMBS) bounced hard off of the 21EMA with “tennis-ball” action. It would have been a fine place to add the stock, but I missed it. I’d look to add on a heavy-volume breakout through $44, but with today’s 7% move, there’s really no technical stop-loss area, so a few days consolidation before breaking out would be even better.

Aehr Test Systems (AEHR) is undergoing a well-deserved rest after it’s massive move last month. There’s still not a complete base or pivot point here, but a quick trader could try it on a test and bounce off the 10-day MA around $34 tomorrow if volume is coming in.

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 Sunday night for an update on our stocks.

Cheers,

Dan Dormody