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The Next Market Leaders - 4/16
Markets closed around even on the week after holding key support levels, with choppy action in growth names making it difficult to get positioned. The current nature of the market action requires sniper-level accuracy for entering trades and punishes chasing even slightly extended moves. Breakouts have been fading and follow-through has been extremely rare up to this point. Market rotation is changing day to day and can be confusing as most sectors fail to find consistent traction.
Nonetheless, while stocks have been faking out on low volume, many potential leading stocks are still behaving constructively within bases. I have been taking fewer trades, trading small, and ruthlessly protecting my breakeven by cutting stocks that don’t show profits right away while moving up stops ASAP on the ones that do. I’m focusing on my core list of stocks as they are beginning to set up nicely.
Tonight, I’ll cover several setups I’m watching into this week. There are really only a few that are near a buyable position so I imagine there are lots of eyes on them. That could be a positive, or it could be another sign of poor breadth/leadership up to this point, but either way, they are still valid setups. Just don’t chase them if you miss. Let’s get into it!
The Nasdaq closed Day +21 above the 21EMA, but net highs/lows continue to fluctuate between highs and lows, with a reading of -41 net lows on Friday.
The Nasdaq continued to hold the key support level and is acting perfectly normal as it consolidates above all rising key moving averages on below-average volume. The levels I’m watching are marked on the chart.
Zooming out a bit, the S&P-500 has remained in this trading range for nearly 12 months, but for the past 6 months it has formed higher-lows on the daily chart. Despite the general choppiness with the moving averages crossing up and down, it’s undoubtedly positive and constructive action.
Earnings and Macro
Earnings season is kicking off this week. Here are my highlights:
Wednesday: TSLA, ASML, LRCX
Arista Networks (ANET) recovered at the 21EMA and is consolidating nicely within the flag pattern. It tested the breakout area at Friday’s open but quickly failed as volume remained well below-average. I’d consider starting on another test of the 21EMA or on a high-volume breakout through $166.
On Holding (ONON) broke out through the $30.10 inside-day pivot point and descending trendline on Thursday with good volume, but found distribution at $32 as follow-through remains fickle. Still, it’s above the trendline, and I’m watching it on shorter timeframes for another go through $31 with stops around $30.40.
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!
Samsara (IOT) held the 21 exponential moving average (in blue) and is consolidating on low volume through the base. It’s now back above the anchored VWAP from the earnings gap. It would be ideal to add on a test of the $19.50 area, with stops at $19, before breaking out through the clear pivot point at $20 with volume.
Axon Enterprise (AXON) is consolidating in a tight range with great volume characteristics. It’s above both the 21EMA and VWAP from the earnings gap, and printed an inside-day on Friday. I’d consider either a breakout through $225 with stops at $221, or another test of support on weakness.
Hims & Hers Health (HIMS) traded back up through the 21EMA and VWAP from the recent price low, but closed right at these levels on Friday. This one is a bit whippy. I’m watching for a move off of Friday’s low, where I would consider adding, before a breakout through $10.10 with high volume.
Lululemon Athletica (LULU) is still holding the gap-up area very well. I’m watching for a high volume move through the $370 level as it provides a low-risk trade with stops at $362.
Rambus (RMBS) is one of the strongest names in semiconductors and could lead if rotation comes back into the sector. It’s holding above the AVWAP from the late March breakout, which could be a spot to add on another test/hold. Otherwise, the pivot is a strong breakout through $51 with stops just over $49.
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.