The Next Market Leaders - 4/19
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Markets showed signs of improvement early this week as a few leading names broke out from pivot areas and closed higher on volume, but sputtered a bit today as volume and breadth remained low on the indexes. As earnings season kicks into high gear next week, it feels like we’re in a “wait and see” period before earnings that could rally the next leg higher or blow everything to pieces. NFLX closed down 3% after reporting yesterday and TSLA is down 5% after hours after reporting in-line with expectations.
Breadth, in terms of the number of leadership-quality stocks setting up in constructive patterns near pivot points, remains low. There are a few bright spots of strength (IOT, HIMS, ONON, DKNG), most of which we caught in this letter, but other than that, there isn’t a lot setting up. Don’t feel like you’re missing out or need to rush into positions. I’m still seeing rejections at pivots on low volume and even breakdowns in my broader list. This round of earnings could serve as a catalyst in either direction.
Tonight, I’ll cover updates on recent setups and winners, and a few new setups, but most need more time, as has often been the case lately on the daily timeframes. Let’s get into it!
Index Update
The Nasdaq closed Day +26 above the 21EMA. The previous rally ended at Day +28 in February. Net highs/lows continue to battle it out, with just 1 net high today.
The Nasdaq remains in the range after breaking out at the end of Q1. It hasn’t done much of anything in April so far, as it’s trading on low volume while the moving averages start to catch up to price. This is constructive as long as it remains above the 21EMA. I’m watching for it to move up and out through the upside resistance area.
The S&P-500 has closed in the middle of the daily range for the past two sessions, though it’s holding above the resistance-turned-support area, all rising key moving averages, and the longer-term AVWAP from the all-time high. It needs to break above 4200 to form a higher-high and trend continuation.
Stock Updates
Hims & Hers Health (HIMS) staged a beautiful breakout through the $10.10 pivot point on 4x daily volume while decoupling from the index action. It’s up over 10% and is one of the brighter spots in the market after closing again at highs today. I took a piece off this afternoon and raised stops on the rest to $10.50.
Samsara (IOT) is one I noted 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. It opened at $20.20 on Monday morning and I didn’t get a fill, as chasing gaps has punished lately. This time it worked out. It still looks good after closing at highs today.
Lululemon Athletica (LULU) moved up through the $370 level, but volume was just average. It’s going to need well above-average volume to push up through overhead resistance. Watching.
On Holding (ONON) continued up in the base through $31, but again got rejected at the $32 area today. This one looks like it needs to consolidate a bit longer and perhaps test the 21EMA before breaking out in earnest.
Arista Networks (ANET) never retested the $166 pivot point, and when volume finally did come in (today), it was to the downside. It’s now below the 21EMA, but holding the volume weighted average pricing anchored to the last breakout. Avoiding for now. Earnings 5/1.
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!
Integral Ad Science (IAS) has closed up 9 weeks in a row and has been rallying after gapping up on the last earnings report. Now it’s pulling back on light volume. Let’s see how it acts at the 21EMA. Earnings 5/4.
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. The pivot point is $228.80, but volume needs to be stellar.
Rambus (RMBS) is one of the stronger names in semiconductors and could lead if rotation comes back into the sector. It looks to be putting in a base and the volume has been low on the pullback so far. I’m watching the pivot point at $51, but it reports earnings on 5/1, so I might wait until then at least.
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.