Markets closed slightly lower today for the third close in a row near daily lows. Friday’s low around the 200-day moving average was tested intraday and held. This remains a key level of support that needs to hold on both indexes. As long as it does, I am looking to slowly increase exposure for the next leg up.

It’s still a very mixed picture, though, and a high level of caution is required. Net highs/lows have swung up and down in recent days. Some individual stocks are working on earnings surprises while others can’t find any follow-through. The way that the highest quality stocks have been showing relative strength is what is tipping the scales for the bulls, in my opinion.

Many potential leaders have been tightening up on decreasing volume amidst the broader market volatility. I’m watching these closely to move up through pivot points with volume if/when the downside market pressure eases. Semiconductors have been my area of focus as many in the group have been acting well. I’ll cover the best below. Let’s get into it!

Index Update

The Nasdaq closed Day -7 below the 21EMA with net highs/lows oscillating between negative and positive, reflecting the range-bound environment. It remains above the longer-term moving averages.

The Nasdaq tested and held the 200-day MA (in white) as support today, which is about to start turning up as long as price remains above it. The fact that it hasn’t been able to put in much of a bounce so far is a slight concern, but the lack of downside volume is positive, so it’s in no-man’s land between the key MAs.

The S&P-500 tested and held the now rising 200-day moving average as support today, but is similarly in no-man’s land between the 200MA as support and 50/21 MAs as resistance. It wasn’t able to quickly regain the rising trendline. Let’s see if it can move off the 200MA and regain the 50MA.

Stock Updates

NVIDIA (NVDA) announced a $10B offering after-hours yesterday, so I closed the trade at $230 for no gain/loss. It broke down through the gap-up area today, but I’m surprised more damage wasn’t done, as it only closed 2% lower on below-average volume. I would consider another high-volume move through $230 with a stop at the lows.

Qualtrics International (XM) moved up through the $16.75 pivot point with good volume, but hasn’t yet followed through as it posted two inside-days in a row on decreasing volume. If upside volume doesn’t come in, I’ll close it out below $16.70.

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) held the 21EMA and is up from the $84 inside-day early buy point. Today it printed another tight inside-day on low volume, offering a second opportunity to add the stock for low risk. I’d look to add on a breakout through today’s high with stops at $84.50.

Allegro MicroSystems (ALGM) is basing after the big move while the moving averages catch up to price. It has formed a pivot of $45 in this short base and I would look to add on a move up through this level on heavy volume.

Aehr Test Systems (AEHR) looks almost ready to move to all-time highs at $37 from the flat base pattern. I would prefer to see one or two more tight days before breaking out so that there’s a better spot to manage risk.

Axcelis Technologies (ACLS) closed at all-time highs today on slightly above-average volume. I was expecting a bit more of a consolidation but it didn’t want to wait. Let’s see if follow-through volume comes in over the next few days. I’d consider it on a retest and hold of the $230 pivot point with tight stops in case of failure.

E.l.f. Beauty (ELF) is tightening up nicely above all key moving averages and is showing clear relative strength. The new breakout pivot point is at $75.50 with high volume if the indexes are bouncing as well.

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