Markets continue to consolidate above their 21-day moving averages after being extended coming into last week. I am viewing it as a constructive pullback.

Leading stocks reflect that as well, continuing to show a high level of relative strength by either falling less than the indexes or trading lower on below-average volume. There are only a few warning signs, mostly in higher-beta stocks like AEHR, but I’m not seeing the deterioration of support levels on volume in leaders or indexes that would herald a trend change, and as long as that remains the case, this is healthy. CPI data is due out Tuesday morning. Be sure to update stop-losses in the case of a hard reversal and be ready to act on a strong move.

Around the broader market, volatility around pivot points has remained whippy. This makes it difficult to think aggressively and signals that it’s not quite the time. I am looking to continue to ladder up exposure in the best stocks as they present opportune buy points, but I will wait as long as it takes, and only do so on top of positive trade feedback. Leaders are starting to form short bases and pivot points on which to add. I’ll review those below. Let’s get into it!

Note: There will be no new issue on Wednesday night as I am traveling abroad for the week.

Index Update

The 10-day moving average has turned down, but the Nasdaq still closed Day +24 above the 21-day EMA. New lows edged out new highs for the first time since the uptrend begin on 1/5, so that’s a potential concern and something to keep an eye on, but not a huge deal so long as it doesn’t accelerate in the coming days.

The Nasdaq closed just above our support levels on Friday on average, decreasing sell volume. It’s still above the 21-day EMA, and it also has the 200-day and rising 50-day as potential support levels. The best case would be to see volatility begin to dampen visibly - price action remains wide and loose. Upside levels marked.

The S&P-500 held the 21-day EMA on Friday in a sign of constructive action. It did move below the 4,100 support level, but it still has several potential levels of support just below. This is a healthy consolidation unless there is a high-volume break below the moving averages.

Earnings This Week

This week's earnings highlights:

• Monday: LSCC, AMKR, HLN, ANET

• Tuesday: CPI Data at 8:30, GFS

• Wednesday: SHOP, ASC

• Thursday: Initial Jobless Claims, CROX, TOST, IRDM

• Friday: DE, MNST

Stock Updates

Allegro MicroSystems (ALGM) is one of the strongest growth stocks in the market, still well above even the 10-day MA despite the downside move in the indexes. This is at the top of my focus list. I’m watching for a bit more of a rest to set up a breakout pivot point, or a successful test of the 10MA could work to add on weakness. Stops in profit on a 21EMA violation.

Arhaus (ARHS) is positive as long as it continues to hold the 21EMA. Stops just below that level. Watching for a move through $15 on heavy volume to add.

Credo Technology (CRDO) is acting super near all-time highs. It’s still holding the $18 all-time high breakout point, very constructive given the pullback in the indexes, and a clear sign of accumulation. Stops around $17.30, and I would look to add above $18.80 if the volume is compelling.

Mobileye Global (MBLY) is still up over 15% from the breakout buy point. It tried and failed to push through $44, but that’s fine for now. It would be good to see if tighten up a bit more over the next few days/weeks before pushing up through $44 again as a spot to add.

Amkor Technology (AMKR) sold off to the 50-day MA on higher volume as I noted last week that the relative strength was declining. Earnings are 2/13. Needs to show support at the 50-day to be considered as a leader.

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!

Lattice Semiconductor (LSCC) is acting perfectly normal above the rising moving averages. It’s forming a short, loose base with all-time highs at $85. Earnings are reported tomorrow, so I will look to add if there’s an EPS beat and/or guidance raise and a positive reaction pushing it to highs on volume.

Axcelis Technologies (ACLS) had a positive reaction to the big earnings and revenue beat on Thursday, moving to new highs at $121. It held this level with an inside day on Friday. Stops should be on a 10-day MA violation if you’re in. I’m still waiting for a better base…

Aehr Test Systems (AEHR) broke down below the 21-day EMA after announcing the Secondary Offering last Wednesday. It closed just above potential support area at the last breakout point and VWAP from the last power earnings gap, so could be added for a low-risk trade on a hold of $30. I’m more apt to wait to buy on strength.

NVIDIA (NVDA) is taking a rest after a big move off the bottom. It’s still holding the 10-day MA. I’m watching for a better buy point to set up to start a position and would consider it on a hold of the 21-day in blue.

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 next weekend for an update on our stocks.

Cheers,

Dan Dormody