Markets are showing signs of a short-term rest after a powerful move from the bottom in January. The upside continuation on accelerating volume over several weeks has been incredibly positive, but now the indexes and many individual names are extended, and a constructive pullback/backfill would provide a great opportunity.

High quality, potential market-leading stocks vaulted to blue sky territory on institutional bids last week. The rotation into these names in addition to the more oversold names that have been running is another piece of evidence that this rally is more than a bear-market short squeeze. I will continue to look to increase exposure over the next few days/weeks barring a major change.

We have a fantastic list the the next market leaders, but now, as always, the game is to wait patiently while they set up and break out through proper buy points again. I already caught a few, but more got away and I will be looking to add as they pull back to moving averages and/or set up new pivot points to buy on strength. I’ll cover them below. Let’s get into it!

Index Update

The Nasdaq closed Day +19 above the 21-day exponential moving average with Net highs/lows up and continuing to expand even further. Price is now well above the 200-day moving average, which should begin to turn up in 2-3 weeks, the irrefutable definition of a long-term trend change in the indexes.

After gapping up on the highest volume in a year, the Nasdaq closed lower on Friday for only the second time in as many weeks. The recent strength has been remarkably compelling. Consolidation in this range while the moving averages catch up would be good to see as price was getting well extended.

The S&P-500 confirmed the daily higher-high, a change in trend, on stellar volume Thursday. The moving averages are congregating just below price and should now act as support for this index on a retest. The 4,100 level could also act as support. Unless price slices below those support levels, I see no technical case to be bearish, though a short-term retrace should be expected.

Stock Updates

Amkor Technology (AMKR) broke out through the $30 bull-flag pivot point on Thursday morning, but paused at all-time highs as the indexes faltered. I sold early for a small gain as I’m expecting a short-term pullback. Can add back on a strong move through $31.50. Earnings 2/13.

Arhaus (ARHS) is still showing solid relative strength just below all-time highs at $15. I will look to add on a breakout, though the first position might stop out for even around $13.65 if there is a pullback. Watching closely.

Credo Technology (CRDO) is acting super near all-time highs with fantastic volume characteristics. I’m watching for it to hold the 10-day MA in the coming days. Stops around $17.30 and will ADD on a strong move through Friday’s high.

Lattice Semiconductor (LSCC) was up over 6% from the buy point before taking a break on Friday. It looks like it will come back down to test the pivot, so watch how it acts there. We want to see “tennis-ball” action. Stops just below $76. Earnings 2/13.

Mobileye Global (MBLY) is up over 15% from the breakout buy point on increased volume, but needs a rest as it’s extended from the MAs and has had two weaker daily closing ranges. I am looking to buy on a test of the 10 or 21-day MA in the coming weeks.

Allegro Microsystems (ALGM) has been a massive winner after earnings and is up 15-20% depending where you bought. Watch to add on weakness, to the 10-day MA or after a short base, for another buy. It should be supported as everyone is now watching it after the big earnings move. We’ve been on it since early Jan!

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!

Aehr Test Systems (AEHR) is undergoing a well-deserved rest after it’s massive move last month. It’s sitting pretty above the 10-day MA with decreasing volume. I’m watching for a breakout above $$37 with volume.

Axcelis Technologies (ACLS) is up nearly 50% since the start of January. It’s too extended to buy here, but perhaps there will be some profit-taking before earnings. I’ll be watching the earnings report on Wednesday and reaction to potentially add on a breakout to new highs.

Rambus (RMBS) failed at the $44 pivot point, though it wasn’t difficult to see coming as the indexes were extended into resistance and I had noted that a few days consolidation would be better. Earnings are due out tomorrow, so I’ll be watching the reaction closely for another go through $44.

NVIDIA (NVDA) has performed just as well as many of the other names in semiconductors even though it’s in a worse technical position relative to highs. The inverse head and shoulders pattern appears to be playing out. I would consider starting an early position on a test and hold of the $194 area in the coming days.

Runner Ups: ELF, AI, SLAB, ATAT, PERI

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 Wednesday night for an update on our stocks.

Cheers,

Dan Dormody