The news-driven market environment has remained treacherous for trading as the world watches and reacts to the rapidly-developing situation in Ukraine. Today the EU imposed new sanctions that may devastate the Russian economy; Russian currency, the Ruble, was down as much as 34% tonight in futures trading. The ramifications of this will no doubt be felt around the globe with rising oil prices that could be pushed much higher with any further escalation.

The Nasdaq and S&P-500 index futures are both down more than 2.5% as I write this, so I’m glad that I’m in cash, as most should be except for very quick traders. It remains a day-trader’s environment as holding overnight can lead to big unexpected gap-downs or gap-ups based on breaking geopolitical developments. I’m not holding anything overnight unless I have a decent profit cushion on the position.

Tonight, I’ll cover mostly stocks in energy that look set up for a leg higher. The rest can wait until we get more uptrend confirmation in the indexes. Let’s get into it!

Index Update

The Nasdaq remains about 1.5% below a falling 21EMA with net highs/lows negative for 6 days straight, signaling very strong caution on long positions.

Price action did improve in the Nasdaq overall as news of the Russian invasion led to a big gap down on Thursday, which immediately was bought up and the index closed 3% higher on the day. Momentum continued upward on Friday. The next test for the index is the underside of the 21-day EMA, but based on futures trading lower, it looks more likely that the January lows will be tested again. Look for this level to hold.

The first day that could qualify as a Follow Through Day is Tuesday if Thursday’s lows hold, so I’ll be watching for that closely.

The S&P-500 exhibited similar strength at the end of last week after undercutting the January lows, but it remains below both the falling 21-day EMA in purple and the 200-day MA in white. No reason to get too excited and heavily involved until this changes.

Portfolio Update

YTD Return: 3.15%

YTD S&P-500: -8.00%

Recent Moves

• PANW - Bought on Friday at $541 and sold half around $563, up 5% on the rest

• DOCS - Bought wedge pop on Friday and stopped out for a 3% loss

My Positions

95% cash.

Palo Alto Networks (PANW) is a cybersecurity firm that traded higher last week on reports of cyberwar activities. It’s a bit choppy but it traded above the $538 resistance area on high volume so I got in at $541. I took half off with a nice profit and have stops at even on the rest. If the market turns up, this could be a leader.

Best Setups

The best setups right now are in the energy sector. There are many solid setups here, and the one/ones I buy will be the ones that are breaking out past their buy points with the highest volume relative to their average. To me, this provides confirmation for the move higher. Careful chasing these names if they gap up tomorrow.

Most other stocks will need more time to set up bases, so I’ll save them for another day.

BP Prudhoe Bay Royal (BPT) is up over 20% from my noted buy point a few weeks ago. Last week I mentioned to take some profit and move stops up to even on the rest. This one looks too extended to consider adding at the moment.

RPC Inc (RES) closed right up against the breakout point of $8.40. I’ll look to buy it if it continues higher on above-average volume tomorrow with a stop at $8.15.

NexTier Oilfield Solutions (NEX) found support at the ascending trendline and 21-EMA after a big move up and now is breaking out of its descending trend. I’ll look to buy if it’s moving higher on volume tomorrow with stops just below $7.

Hess Corp (HES) is one that I traded and stopped out of a few weeks ago. It has been tightening up nicely and looks like it might be ready to move higher as it broke out on Friday. If it’s moving higher on high volume, I will consider as close to $97.50 as possible with stops at $94.

Vaalco Energy (EGY) is a bit of a choppy name but printed an inside-day on Friday in a flag pattern. The buy point is a move above Friday’s high and the descending trendline at $5.50 on high volume. with stops at $5.15.

Canadian Natural Resources (CNQ) is another drilling company that looks ready for higher prices. The buy point is right above Friday’s close at $55 on high volume with stops at $52.

That’s all for tonight! Hopefully we have more stocks to consider later this week as the market should provide us with more clues in the coming days.

See you back here on Wednesday night for an update on our stocks.

Cheers,

Danny Deals