A wild week of trading so far as the wild year continues forward. Energy stocks were the talk of the town as oil surged over 30% since the start of March. After scanning on Monday night, I noted on Twitter that to take caution with new positions in energy stocks as they had become “very extended” and an obvious trade. Low and behold, most sold down on Tuesday and continued down today for a much-needed break.

There are still precious few decent chart patterns as the market continues on its volatile, news-driven, choppy tirade. Cash remains the best position for now as making any real progress in this market is incredibly difficult. Rather than grind for hard pennies, it’s better to wait for easy dollars.

Tonight I’ll cover a few long setups as well as others that I’m watching to sell-short - it all depends on what the indexes do next, but based on the recent action, I think we’re heading lower in the next few days. We’ll see. Let’s get into it!

Index Update

The Nasdaq gapped up today back over the key level of January lows and held it well, finishing up over 3.5% on the day. This is not healthy action overall and volume on the day was lower than the previous two distribution days so I’m still not convinced. It hit resistance at today’s high which should prove difficult to push through. Opening up longs in this precarious position doesn’t provide a good risk/reward.

YTD: -15.08%

The S&P-500 also jumped back above it’s key support area. I’m not sure that it has the strength to continue higher, but I’m often wrong. Price is king. If it does move higher, the ~4,400 area should prove as heavy resistance.

YTD: -10.42%

My Positions

95% cash.

DocuSign (DOCU) provided a good risk/reward setup after it failed to regain the century mark today. I shorted a small position around $98.50 with stops $2 higher. It reports earnings after the close tomorrow so I’ll be out before then.

Earlier this week I opened a short at $99.50 when it broke $100 and closed it around $95 for a tidy gain.

Best Setups

If the market is moving up tomorrow, here are a few long positions to consider.

Lantheus Holdings (LNTH) moved up 80% in the past two weeks and has only corrected 10% from the highs. This is a nice high tight flag pattern that could probably use a few more days to build out, but the buy point is a move above $54 on heavy volume.

UserTesting (USER) is showing good relative strength by printing higher lows as the market is printing lower lows. Today it traded an inside-day, so the buy point is a move above today’s high at $9.70 and add above $10 with stops $0.40 lower. Volume should be high.

Enphase Energy (ENPH) has moved well off of its lows as solar may prove to be a strong trend for the next few weeks. I’ll consider it on a move above $184 on heavy volume with stops at $7 lower. That will confirm the double bottom pattern.

If the market breaks down again in the next few days, these stocks are at the top of my watchlist for shorting.

Cloudfare (NET) is forming a bear flag pattern with the 50-day moving average right through it. I’ll consider shorting if the stock finds resistance at the 50-MA in yellow and if it breaks down through the bear flag around $92.

Digital Turbine (APPS) looks weaker than most software stocks as it already broke down below the bear flag, though it bounced today with the market. If the market is moving down, I’d consider shorting with stops at the high of day today just above $40.

Hubspot (HUBS) is another that broke down from the bear flag and is coming up to test the trendline. There are trapped buyers in the stock as noted by the big volume bar below so it could sell down quickly if it breaks below $400.

Peloton (PTON) has a lot of trapped buyers after the frenzy on buyout rumors. The sell point is a move below $22 and all time lows are just below $21 - if it breaks down through this, selling could cascade quickly.

That’s all for tonight! If you liked this column or have any feedback about the content, hit me up on Twitter with the link below or respond to this email.

See you back here on Sunday night for an update on our stocks.

Cheers,

Danny Deals