Markets lost their footing to close out the week after a one-day, low-volume rally on Wednesday. I was dubious about the validity of the rally and wasn’t surprised to see the sell off continue into the long weekend. Tonight, futures on the Nasdaq are indicating a 1% gap-down in the morning.

I noted last week that it would be a good plan to maintain a very high percentage of cash going. I bought the solid breakout in ATI as per my plan, and I’m holding a short position in SQQQ, but I’m otherwise in cash. Earnings season continues this week and below I will list a few key upcoming reports.

There isn’t a whole lot to consider at the moment, so I’ll cover a few stock updates, and reiterate energy/cyclical stocks that are holding good patterns. Let’s get into it!

Index Update

The Nasdaq remains below a falling 21EMA with net highs/lows negative for 6 days straight, signaling very strong caution on long positions. Here you can see the progression over the past two weeks:

It closed near weekly lows and remains below all of the key moving averages. Looks like this index will head down to test the support levels noted below. For now, growth and technology stocks are not the place to be.

The S&P-500 broke decisively through it’s 50-day moving average on a distribution day Friday and is now below all key MAs. I have a short bias until it can regain these levels - there’s a lot of open space between here and the lows, so it’s good to be in cash.

Earnings Reports

Noteworthy earnings reports this week:

• Netflix (NFLX) - Tuesday after close

• Tesla (TSLA) - Wednesday after close

• Freeport McMoran (FCX) - Thursday before open

• Snap (SNAP) - Thursday after close

• Schlumberger (SLB) - Friday before open

Stock Updates

Allegheny Technologies (ATI) broke out through my buy point at $28.50 as volume came in on Friday. I noted on Twitter that I bought at $28.70 and it had a great close nearly $2 higher. I already took half off for profit at +6%, which was three times my risk, and moved stops up to even on the rest.

Best Setups

SES AI Corp (SES) is a newer issue and a speculative play that can move fast, as showcased in its price action the past few weeks. It moved out of a bull flag pattern last week and then printed an inside day that tested the descending trendline. The buy point is a breakout through $9.10 with stops at $8.69, so use a smaller position for the wider stop.

Vermillion Energy (VET) is one of many oil & gas companies with stellar earnings and revenue growth, but it knows how to move and it’s flashing a solid pattern here. Friday’s inside-day provides a decent entry tactic with a buy point through $22 and stops at $21.25 if supported by high volume.

Pioneer Natural Resources (PXD) is a leader in oil & gas. It trades a bit choppily, but it’s tightening up on a dry-up in volume, and has printed two inside-days in a row, a sign of volatility contraction. If energy stocks are moving higher tomorrow, a good risk/reward buy point for PXD is a move through $257 with stops at $254.

Diamond Offshore Drilling (DO) is a new IPO in the energy sector that can move if it breaks out through $8 on high volume. Energy stocks are still running so the group is solid. I’d place the stop a little wider than usual, around 4-5%, so I’d use a smaller position size to compensate for that.

General Dynamics Corp (GD) is a defense company that’s setting up nicely, tightening up in it’s base on declining volume. The buy point is a move above $247 on volume with stops at $241.

Lockheed Martin Corp (LMT) is another defense stock that’s printing new highs in relative strength before price and tightening up on the daily. It reports earnings on Tuesday morning, so if earnings are good, the buy point is a breakout above $475 with technical stops at $465.

Turquoise Hill Resources (TRQ) is a gold and copper miner that gapped up on its highest volume ever a few weeks ago. It’s a slower mover, but the breakout buy point is a move above $30.75 with high volume.

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 Wednesday night for an update on our stocks.

Cheers,

Danny Deals