The Next Market Leaders - 2/2
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Markets have snapped back so far this week, rallying from oversold conditions and paring back some YTD losses, but the environment remains treacherous except for the very quick trader.
The stocks that rallied the hardest were the ones that were off 60-70%+ from their highs like AFRM and UPST, indicating to me that this recent uptrend may merely be an oversold bounce. There was a bit more participation today but several stocks sold off hard under the hood while the major indexes were buoyed by GOOGL being up 8% after beating earnings. Now overnight futures look headed much lower.
As I noted on Sunday, there’s no reason to rush back in. When it’s time, we’ll know, because there will be much more quality setups. For now, it’s best to maintain a high percentage of cash until conditions improve. Tonight I’ll cover a few stocks setting up as well as many more potential short-sells looking ready to head lower.
Index Update
The Nasdaq bounced nearly as hard as it fell, up nearly 5% in the last 3 days alone. Now it’s coming up against resistance and appears to be stalling out a bit. Conditions remain incredibly volatile which is why you have to be very quick.
The S&P-500 was extended to the downside just a few days ago and now it looks extended to the upside, coming up against the dual resistance of the downward trendline and the 50-day MA. I’d be careful opening new long positions here.
Portfolio Update
YTD Return: +5.02%
YTD S&P-500: -4.61%
Recent Moves
UPST - Bought and sold for a 6% average gain
AFRM - Bought and sold for a 3.5% gain
NVDA - Bought and sold for a 3% gain
APA - Bought and sold about even
ETSY - Bought and stopped out for a 1.5% loss
Position Updates
95% cash.
British American Tobacco (BTI) - I bought a small starter position as it broke above my buy point, but the volume was low - I am waiting for volume to come in before adding more to the position. Stops at $42.50.
Best Setups
APA Corp (APA) crossed above my $34.50 buy point yesterday, but volume on the day was lower than average, so I sold it when there was a lack of follow-through today.
Pioneer Natural Resources (PXD) crossed above my $218 buy point on Monday, but I passed on it. Move stops up to $215 if you’re in.
AbbVie (ABBV) reported good earnings this morning and has formed a bull flag with solid volume characteristics. If the market is holding up, the buy point is a move above $139 on heavy volume with stops $4 lower.
Short Setups
If the market is selling off and fear returns, I would consider these short setups.
Portillo’s (PTLO) is a short I called out on Twitter this morning and it fell over 7% right after. Move stops up to even if you’re in.
Arista Networks (ANET) is a low-risk entry right here around $125 to start a short position. Then, if the trade is working, I’d look to add on a break below the bear-flag at $117. It’s just above a big gap to fill down to $103.
Arqit Quantum (ARQQ) barely even attempted a bounce and is sagging down to the sell-short point of $15 on high volume. Buy stops $0.50 higher.
Riot Blockchain (RIOT) may need a bit more time to consolidate within this triangle, but the sell point is a move below $13 if Bitcoin is also headed lower. Place stops $0.50 higher.
HeadHunter Group (HHR) staged an impressive recovery from the short-sell point a few weeks ago that netted 25%. That being said, it’s coming up on a triple-threat of resistance with the horizontal zone, 200-day MA and 50-day MA. It’s printing a bearish frozen-rope pattern, so the sell point is right here between $47.50-$48 with stops just above $49. It’s a good low-risk entry.
Samsara (IOT) also looks OK as it put in a nice recovery, but this should be a tough spot for it to overcome with another triple-threat of resistance in the descending trendline, horizontal resistance, and anchored VWAP from its IPO breakout. If the market is heading lower, I’d short sell it anywhere above $21 with stops $1 higher.
Moderna (MRNA) is building out a bear flag with a short-sell point of $153 on volume with stops $4 higher.
Broadcom (AVGO) bounced off of it’s 200-day MA but has been moving up on lighter volume the past two days. Now it’s coming into heavy resistance at the 50-day MA and previous support, so I’d consider shorting it below $600 if the market is heading lower with stops $10 higher.
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 Sunday night for an update on our stocks.