The Next Market Leaders - 3/29

Markets gapped up today and initially looked like more of the same choppy, low-conviction movement before closing strong in the last few hours. Though it appears to be follow-through days on both the Nasdaq and S&P, there wasn’t exactly booming volume. Still, it’s objectively positive; markets have calmed down and recovered from the banking mayhem a few weeks ago.

There was also low volume action in most individual stocks today, particularly as they moved up through early pivot points, so it was difficult to act on signals. Nonetheless, many leaders are in a great technical position to buy if/when volume comes in to the upside alongside a market rally. I’m watching closely for that to occur over the next few days as a confirmation to establish exposure for the next leg up.

If you feel behind, you’re not alone. The recent market has been extraordinary difficult to make progress in, requiring a lot of patience. That will change if a real rally starts, and there will be many spots to add on the way up, so don’t succumb to poor execution by trying to chase. As always, risk management is paramount, and it remains a risky, news-driven environment until further notice, so act accordingly with open positions. GDP data is reported tomorrow morning so watch the reaction in premarket. Let’s get into it!

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Index Update

Net lows have improved significantly so far this week with a reading of only -1 today. This is what we need to see as a sign of improved activity underneath the surface of index prices. Both the Nasdaq and the S&P-500 are above all key moving averages.

The Nasdaq gapped up near potential resistance after selling down on two days straight of the lowest volume since Christmas. It’s above all key rising moving averages. The 200-day MA is starting to turn up in an irrefutable sign of a trend change.

The S&P-500 gapped up through the descending trendline and 50-day moving average, closing strong. The trend is more convoluted in this index as the moving averages are crossing up and down. Let’s see if the market puts in end to the trendless conditions over the past few weeks by following through out of the range.

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Stock Updates

Fastly (FSLY) is up from Friday’s inside-day buy point, and presented another pivot point yesterday at $16.60. It looked good this morning but came back into the base and closed there with low volume. Continuing to watch for volume to come in, but there’s a lot of overhead resistance that makes it more prone to failure.

NVIDIA (NVDA) is up over 11% from the first buy point at $243, holding the anchored VWAP from that day as support. It sold down from resistance on the lowest volume since December for two days in a row. I’m looking to add back the position I sold if volume can come in through the $270 area.

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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!

STMicroelectronics (STM) was at the top of my focus list coming into the day after standing out yesterday, but it gapped up over my $50 pivot point and didn’t look back. Nothing’s been easy lately… watching for a potential retest of the $50.50 area or a high volume breakout through $52. The weekly chart looks terrific.

Duolingo (DUOL) is up over 50% from reporting earnings on 3/1 and is now trading in a tight range on below-average volume just below 52-week highs. The pivot point is around $139.59 on heavy volume, with stops at $135.

First Solar (FSLR) printed a bullish engulfing candle after a low-volume inside day yesterday, but volume was still well below average. I’d like to see heavy volume on a move to new highs through $218, but would consider starting on a test/hold of the $212 area.

Aehr Test Systems (AEHR) isn’t exactly showing ideal action here after the wide range red-day yesterday, but there weren’t a ton of sellers and it recovered above the pivot point today. The group is looking good, too. Let’s see if it can move above $38 tomorrow with volume, at which point I’d consider starting a position with stops just below $37.

Arista Networks (ANET) has had two days in a row of above-average sell volume, but some profit-taking is to be expected after the move to new highs. Watching to see if it can put in a swift recovery by moving back up through $165 for a low-risk trade with stops at $161, but otherwise it could use a bit more time to consolidate.

Hims & Hers Health (HIMS) has been knocking on the door of the pivot point just over $10 for the past couple of weeks. It has superb earnings and sales growth and estimates, so I’d look to buy if volume comes in above the pivot.

MercadoLibre (MELI) is still basing after a stellar earnings report a few weeks ago, and it perfectly tested the 50-day moving average as support on Friday. $1,250 is a key level on the weekly chart so I’m watching for a strong breakout there.

Palo Alto Networks (PANW) gapped up on a 35% EPS surprise with the highest daily volume traded since August 2021. It hasn’t given much back and is trading in a tight flag-ish pattern on four days straight of volume drying up. I’d consider buying a move through $193 if the market is moving.

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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.

Cheers,

Dan Dormody