Markets changed character last week with two follow-through-days coinciding with breakouts starting to work on multiple timeframes. Friday’s strong close in both the indexes and leading stocks was a signal that a larger move could be in store.
It’s time to start getting more aggressive as profits start piling up by adding to profitable positions rather than looking to sell them. These could be big winners if this is the start of a longer-term uptrend. As always, now is not the time to be chasing extended stocks or getting FOMO. Stick to your process and execute your setups as they occur. The extended ones will pull back set up again if you are patient. Many other potential leaders are still in their consolidation ranges.
I’ll cover a few of the best stocks that are poised to break out from low-risk setups if the market continues to work this week. Quite a few setups from last week broke out and closed higher from their pivot points. Let’s get into it!
Net highs/lows finally turned positive on Friday with 53 net highs. All trend indicators are now green with the Nasdaq above all key moving averages. This signals risk-on.
The Nasdaq powered through the resistance area after holding the anchored VWAP from all-time highs as support. It’s now above all rising key moving averages and leading as money flows back into tech stocks. It’s slightly extended here, but a larger move could be in store with a lot of money on the sidelines and a new uptrend initiated.
The S&P-500 did exactly what I was looking for as it put an end to the trendless conditions by following through out of the range and powering through the all-time high AVWAP. Watching for it to hold this area as support in the coming days/weeks.
Palo Alto Networks (PANW) moved up through $193 inside day pivot point and followed through on Friday. It’s now just 6% away from all-time highs. Moving stops up to just under $194.
Duolingo (DUOL) broke out to new 52-week highs after trading in a tight range for several days. Volume was good but there was some profit-taking at the close. Watching for it to hold the $139 pivot on a retest.
MercadoLibre (MELI) worked wonderfully up through the key $1,250 key level and closed over 5% higher. Watching for a pullback to add to my position in the coming days.
Fastly (FSLY) is up over 9% from the first inside day pivot point and 6% from the second. Decent volume came in on Friday, especially on the lower timeframes. Moving stops up to $16.60.
Aehr Test Systems (AEHR) is one that I noted “isn’t exactly showing ideal action here after the wide range red-day”, and it should have been managed appropriately after closing below the $38 pivot level on Thursday. It imploded on Friday after guiding down earnings. Tough if you were in this one.
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!
On Holding (ONON) is flagging after the breakaway gap on massive volume. This has potential leading stock written all over it. I’m watching for a strong breakout through $31.50 to start a position on strength, or a test of the anchored VWAP from the gap if it decides to consolidate further instead.
Lululemon Athletica (LULU) similarly gapped up on the highest daily volume since 2019 after posting solid earnings and guiding up on earnings/revenue for the quarter+year. Now it’s in a short, tight flag, and printed an inside-day Friday. I’d consider buying a move through $364.50 or a test of $361 with stops at $356 for a low-risk trade.
Arista Networks (ANET) recovered back up through $165 and closed at daily highs. I’d look to add on a test and hold of the $165 area with stops at Friday’s low or on heavy-volume strength through $171.50.
First Solar (FSLR) tested and held the $212 area and traded on a low-volume inside day on Friday. I’d consider buying a breakout through $218 with stops at $213, though volume will have to be solid. Something feels off about this one.
Allegro Microsystems (ALGM) traded on an inside-day just below all-time highs. It might need a bit more time to consolidate as it doesn’t look as strong as some of the other names at this point. However, I’m watching for a high-volume move through $48.30 with stops at $47.
Super Micro Computer (SMCI) is trading above the 21-day EMA after breaking out to new highs two weeks ago. On the shorter timeframes, it’s moving out of the descending trendline, so I’d look to buy a breakout at $108 with stops at $106 if the broader market is moving.
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.
I see you have very tight stops is that based on the potential profit? If you think the stock can squeeze out a 9% pop you have a 3% stop? Something like that?