The Next Market Leaders - 4/30
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Markets recovered in a big way to close out the week with indexes printing bullish engulfing candles and finishing at weekly highs when just two days earlier they were in danger of breaking down. The market sure hasn’t made it easy to catch a signal, with many of the stocks that I’m watching not really moving yet, along with some shakeouts and complete meltdowns in companies that missed earnings.
The action last week was positive in aggregate, but that doesn’t mean it’s time to go all-in. I’m waiting for the positive prices in the indexes to translate to my list of stocks, as mega-caps have been doing the vast majority of the heavy lifting. It’s still early, so I’m not chasing or lowering my standards. It’s going to be another wild ride of a week with many more earnings and macroeconomic data, including FOMC on Wednesday. Several semiconductors are reporting early this week which could impact growth in one way or the other.
My plan is to watch the earnings reports and reactions, potentially playing the ones that work with power earnings gaps and taking the ones that don’t work off my list. There are some stocks with earnings out of the way that are setting up as well. I’ll cover those below and updates on my broader list, though there still isn’t much at this point. After more earnings and FOMC, there will likely be more setups to cover, but the market will make us wait as long as it takes either way. Let’s get into it!
Index Update
Markets reversed to the upside and closed Day +2 in the new cycle above the 21EMA. After net lows accelerated to the downside, we closed out the week with 27 net highs, though this reading continues to oscillate.
The Nasdaq shook out below the 21EMA but aggressively reversed to close out the week by breaking out on volume. That’s impressive strength and could lead to a bigger move over time as shorts are trapped and many others remain on the sidelines while price is at YTD highs.
The S&P-500 shook out below the 21EMA and anchored VWAP from all-time highs, powering back up through these levels on Thursday and negating the lower-high confirmation that I noted last week. Volume wasn’t quite as strong as it was in the Nasdaq. The 4200 area is a key level that would mark a higher-high and continuation of the uptrend.
Earnings and Macro
Many more macro data and company earnings are due out this week. Here are my highlights:
Monday: RMBS, ON, LSCC, ANET
Tuesday: AMD, SMCI, NRDS
Wednesday: FOMC Statement and Press Conference, HUBS, MELI, ACLS
Thursday: Initial Jobless Claims at 8:30am, AAPL, DKNG, IAS, FTNT, LNTH, FOUR
Friday: Nonfarm Payrolls, Unemployment Rate at 8:30am
Stock Updates
Hims & Hers Health (HIMS) is up over 15% from the pivot point. I closed it out on the gap-up Thursday with the expectation that the gap would fade given the poor market breadth. Happy to lock in the gains with earnings coming up next Monday.
HubSpot (HUBS) kept its structure through the market weakness and tried to move up through the flag breakout area Thursday, but volume didn’t show up. Earnings are due out on Wednesday.
Integral Ad Science (IAS) is setting up nicely after a low volume pullback close to the 21EMA. It printed an inside-day just below the pivot point on Friday, but reports earnings this week on Wednesday, so I’ll likely avoid it until after that.
Crocs (CROX) got smoked with a big gap down after reporting earnings. This serves as a reminder of how risky it is to hold through earnings, especially in this market, where these kinds of moves are showing up all over the place.
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!
On Holding (ONON) held up better than most other stocks on my list during the recent market drawdown, refusing to close below the $32 breakout area support. Volume was low on the pullback, accentuated by Friday’s inside-day on 50% average volume. I’d consider a move through Friday’s high at $32.85 with stops $1 lower.
Salesforce (CRM) is a mega-cap name showing relative strength in a flat base pattern after the earnings gap in late March. I’m watching for a high-volume move through the pivot point at $200.
NVIDIA (NVDA) has shown tremendous resilience after the 140%+ move off the bottom. Sellers really haven’t shown up at all and it held the 21EMA last week, despite most others in semiconductors selling off below their MAs. It could be ready to continue higher with a breakout through $280.
Arista Networks (ANET) recovered back up through the 21EMA on Friday and still looks fine in the bull flag pattern here. It reports earnings tomorrow after the close, so I’ll be watching the report and reaction for a move through $164 or for a new setup after a gap-up.
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.