Markets jumped around and flashed false signals across the board today as the Federal Reserve raised rates by 25 basis points and Chairman Jerome Powell spoke with a relatively hawkish tone during the press conference. Net lows continue to show weak breadth despite the Nasdaq closing Day +7 above the 21EMA.
A handful of leading stocks had set up on Monday and broken out on Tuesday, which led me to have a bullish bias heading into today’s session, but I was prepared for either scenario and ended up stopping out for small profits as the market choppiness resolved lower into the close. Back to cash for now.
As for coming back out of cash, it’s a similar story as coming into the week: “most stocks need more time to work off recent volatility as they continue to base and build out proper pivot points.” Some leading stocks are extended while most others are still basing, and there just aren’t a lot of quality stocks that are at or near a buyable position. I want to see a proliferation of bullish patterns before getting aggressive. For now, there are just a few setups that I’ll cover below if the market does a 180 tomorrow, but I’ll be very selective with execution and will likely just wait for better days. Let’s get into it!
The Nasdaq closed day +7 in the cycle above the 21EMA, but net lows continue in the broader market and have not been positive for the past two weeks. This shows the turmoil underneath the surface, and until this changes, it’s difficult to trust the current uptrend.
The Nasdaq put in a bearish engulfing candle on above-average volume, marking another distribution day. That’s not a great sign, though the fact that it remains above all key moving averages requires objective optimism. It may look to test the rising moving averages before trying to move up again.
The S&P-500 got rejected at the descending trendline and 50-day moving average, closing back below the 21EMA on slightly below-average volume. It’s still above the 200MA for now. As long as it holds last week’s low, it’s positive, but it continues to be choppy and volatile in this range.
MercadoLibre (MELI) is still basing after a stellar earnings report a few weeks ago. $1,250 is a key level on the weekly chart, at which I’m watching for a strong breakout, but it might need some more time and perhaps a test of the 50-day MA before then.
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!
Allegro Microsystems (ALGM) is trending above the 21EMA and building out a base pattern after the big move on a great earnings report in January. I’ve been stalking this one for another entry. Today it printed a 3% inside-day on well below-average volume. If the market can do a 180 tomorrow (big if), I’d consider buying a breakout through $47.25. Either way this one could be getting close.
Hims & Hers Health (HIMS) similarly printed an inside-day on low volume today right up against the $10 resistance area and above all key moving averages. Let’s see if it can move up and out on heavy volume, which is what it will need to succeed through this key area.
Indie Semiconductor (INDI) is firming up on declining volume after an 85% move since January. It squatted at the inside-day breakout today, courtesy of the tough market environment. I would consider it on another try through $10.50 if the market allows for it.
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 Sunday night for an update on our stocks.
I see that you have less than one candle per day in the chart for Meli. Can I ask what you chart settings are?