The Next Market Leaders - 4/23

Markets chopped around in the recent range to close out the week as it seems like the majority of market participants are still in “wait and see” mode. Earnings season kicks into high gear this week with mega-cap tech results incoming.

There’s reason to believe that the range on the indexes will resolve to the upside. Market-leading stocks, including HIMS, IOT, and CROX, have recently broken out on volume and continue to follow through as of Friday. However, breadth has remained poor as most stocks have seen price meander around, and even the leaders have featured volatility around pivot points, making it difficult to get aggressive. It’s still a step in the right direction. It could all be moot if earnings don’t go well in aggregate. Be prepared for either scenario by moving up stops to lock in profits on any current positions while being ready to add if the rally continues.

Tonight, I’ll review updates on the indexes, recent winners that have broken out and followed through, and a few setups I’m watching early into the week while waiting patiently for more to set up. Let’s get into it!

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Index Update

The Nasdaq closed Friday Day +28 above the 21EMA after testing and holding it as support on Friday. Net highs and lows continue to be fickle, closing down on Friday. This metric has not found much footing for the entirety of the 28 day rally, showcasing the poor breadth underneath the surface and extreme stock-picking environment.

The Nasdaq held the 21EMA as support on Friday and closed strong. It remains within the trading range that it’s been in since the beginning of April. As long as it holds the 21EMA, it’s positive, though things could be shaken up in either direction with many mega-cap tech reporting earnings this week.

The S&P-500 is resting a bit after selling down on Thursday and could be putting in a lower-high on the daily chart. It might need another test of the moving averages as it has expended a lot of energy to get to these levels off the bottom. Still, it’s above all rising key moving averages.

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Earnings and Macro

Many more companies report earnings this week. Here are my highlights:

• Monday: CDNS

• Tuesday: MSFT, GOOG

• Wednesday: META, SLAB

• Thursday: GDP Data at 8:30am, AMZN, FSLR, MBLY, LLY, CROX, STM

• Friday: PCE Data at 8:30am

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Stock Updates

Hims & Hers Health (HIMS) followed through with a big up day on Friday after the recent breakout on 4x daily volume. It’s up over 15% from the pivot point, though I’ve already sold some and raised stops on the rest to $10.50. Looking to add back once this sets up again as there is clear strength and leadership here.

Samsara (IOT) is another high-quality stock that is leading after breaking out last week. It gapped up through the original pivot point and is still looking good, though the volume is declining a bit. I’m watching for a move through $22.50 on high volume, or for a pullback setup to materialize.

Lululemon Athletica (LULU) moved up through the $373 level on below-average volume, which was a bit surprising. It’s still looking great. I would consider a pullback and hold at the $373 level to start a position.

On Holding (ONON) has been trading a bit erratically within the base after the analyst downgrade gap, but has fantastic volume and resolved higher on the week after moving up through our $30 inside-day pivot. Buyers won the battle at $32 on Friday as it closed up 5% on the day. Would like to see it follow-through rather than fall back into the base here.

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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!

HubSpot (HUBS) has one of the better looks in the market. It’s in a tight consolidation, including Thursday’s inside-day on very low volume, and closed just below the descending trendline. Looking for volume through this area for a breakout.

Axon Enterprise (AXON) is still 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.

DraftKings (DKNG) has made a big move in recent weeks after closing above the anchored VWAP from the earnings gap. It’s extended from it’s 21EMA and needs to set up again. Earnings 5/4 - one to watch.

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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.

Cheers,

Dan Dormody