The Next Market Leaders - 3/19
Markets bounced on Thursday last week with the Nasdaq leading out of a bull flag, but other indexes are significantly weaker as financials and energy continue to weigh on the averages. Breadth remained poor as the hundreds of net lows continued to close out the week. We’re still in oversold-bounce territory.
Without a doubt, it’s a stock picker’s market. I am planning to be extremely picky with the setups I execute on this week. In this type of choppy, low-conviction environment, it needs to be an A+ setup. Tech and semiconductors look the best to me, but I will look to build exposure slowly. Most need more time to work off recent volatility as they continue to base and build out proper pivot points, but we are getting closer.
I am leaning bullish short to mid term. The indexes were unable to significantly break down to lower-lows despite the terrible fundamental headlines. The general public is bearish and scared. The FOMC interest rate decision is due out on Wednesday and it goes without saying that it will have a massive impact on the market trend moving forward. It’s hard to hold any risk going into that, but afterward, hopefully we have a better picture. Tonight I’ll cover updates on the indexes, the NVDA trade for 7-8% last week, and a few decent setups. Hopefully there will be more to cover later this week as more stocks tighten up and the market settles down. Let’s get into it!
The Nasdaq is the leading index, back above all key moving averages and closing Friday Day +4 in the cycle above the 21EMA. The flat 200-day MA should start rising next week, provided there’s not a breakdown in price. The red flag is the large amount of net lows every day in the week and a half. This signals to approach with caution.
The Nasdaq broke out of the bull flag pattern on high volume, but stumbled a bit on Friday with a middling close on above-average volume. This is the best looking average by far, as money flowed out of energy and financial services and into big-cap technology last week. It’s positive above the key MAs.
The S&P-500 got rejected at the 21EMA and 200MA on heavy sell volume Friday. It still held the higher-low area early last week despite the terrible fundamental headlines. I’m looking for it to have another go at regaining the MAs, as the Nasdaq likely won’t get very far as long as this is below the 200-day.
NVIDIA (NVDA) was the top setup in last week’s issue and broke out from the $243 pivot point on Thursday morning after acting well on the initial market weakness. It followed through on an upgrade Friday, but closed the day at lows along with most other stocks. I sold for a tidy 7% gain. I would’ve liked to have held on for longer, but with the market context looking iffy and Friday’s bearish close, I’m happy to lock it in.
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!
Coinbase Global (COIN) took off out of the wedge pattern and above the key MAs. I was eying it through the $66 pivot point but let it pass, and then it gapped up and ran on Friday. It might do the same tomorrow with Bitcoin gaining over the weekend. I’m watching for another entry point; perhaps on a retest of $70 in the coming days.
MercadoLibre (MELI) is still setting up after posting a stellar earnings report in February. It printed an inside-day on Friday above the 21-day EMA, though volume was a bit higher than I’d like. I’d consider starting a position above Friday’s high at $1,209 with stops at Friday’s low, and would look to add on a strong breakout through $1,250.
Unity Software (U) broke down through the bear-flag and is hitting resistance on the underside retest. If the market is breaking down, I’d look to short this one for a breakdown through $28, but would be careful with stops and would look to take profit relatively quickly.
Arista Networks (ANET) broke out to new all-time highs last week with heavy volume. It’s too extended to consider here, but I’m watching for a pullback as it’s acting like a clear leader.
That’s all for tonight! Reply to this email or hit me up on Twitter if you have any feedback or questions.
See you back here on Wednesday night for an update on our stocks.