Markets reacted mutedly negative to the FOMC minutes this afternoon, but finished even on the day. We’re in a new daily cycle as the Nasdaq closed below the 21EMA yesterday and remained there today, so caution and patience is required here. More economic news is due out tomorrow morning with Q4 GDP and Initial Jobless Claims.

Leading stocks have been holding up very well. Outside of the leaders, it’s no doubt a tough environment for traders, as high volatility around pivots and stop-loss areas have made it difficult to position with any kind of size. Less is more for me here. I’m focusing on only the best stocks and will trade smaller coming out of a cash position until feedback improves.

There should be many high quality setups coming out of this pullback if the market finds its footing like I suspect it will. We are not quite there yet. When setups do proliferate and start to follow-through, that’s when we’ll know it’s time to get aggressive. For now, I’ll detail some of the setups I’m watching to close out the week. Let’s get into it!

Index Update

The Nasdaq closed Day -2 below the 21EMA with net lows for two days in a row as red flags begin to appear in our market trend indicators. Caution is needed here. I’m watching for a quick turnaround back into greens.

The Nasdaq sliced back below the 21EMA on slightly below-average volume after Day +29 in the cycle, finding support near the falling 200-day MA for now. It’s good to see declining volume on this support test, and ideally this area will continue to hold as support. Watching for the 21EMA to be regained in short order.

The S&P-500 is at a key spot with the ascending trendline congregating with the rising 50-day moving average. I’m watching for this area to act as support in the coming days. The 200-day MA is just below and could act as the last line of defense if it comes down to it.

Stock Updates

Allegro MicroSystems (ALGM) has finally started to pull back a bit after breaking out from $36. All looks normal as long as high sell volume does not come in below the 21EMA. A test/hold of that area could serve as a spot to add, and an upside pivot should form shortly as well.

Lattice Semiconductor (LSCC) came back down through the $85 earnings pivot and hit stops at $83. It’s still holding above the 21EMA, so I would consider adding back on a move above $85 with volume and stops below today’s low. It might get a boost from the positive NVDA earnings report.

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!

NVIDIA (NVDA) held the 21-day EMA in today’s trading and jumped 9% after-hours when the company’s Q4 report beat earnings and revenue and raised guidance for Q1. They mentioned they’ll introduce new cloud AI products as well. I’m looking to start a position on a gap-up and go through $230 if volume is heavy, with tight stops at the day’s low.

Ulta Beauty (ULTA) is a slower mover, but it’s been in a steady uptrend since late October. The issue is that volume has declined in the stock since December. It’s printing a short base with new highs in relative strength before price, but the volume will need to be stellar (2x or more) to buy a breakout at $534.

E.l.f. Beauty (ELF) flashed a new high in relative strength today, as it has many times in the past few weeks, on a low-volume inside-day above the rising moving averages. Though it does look a bit extended, the earnings results are fantastic and it could run further. I would consider starting a position above $74.65 with stops just below $72.

C3.AI (AI) is consolidating after the major move a few weeks ago. Volume is declining and it’s holding above the 21EMA. Another few days of tightening up, and perhaps an inside-day or two, would be ideal to form a pivot point.

Qualtrics International (XM) has tons of overhead resistance and the 200MA is still declining, but the earnings results were good and the reaction brought in the highest volume traded since the IPO day. It could be coming out of Stage 1 for a larger uptrend. It found support at the AVWAP from the gap-day. Another day or two of tightening would be preferred before a high-vol breakout around $16.75

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 on Sunday night for an update on our stocks.

Cheers,

Dan Dormody