Markets finished the week down around -2.5% after paring much higher losses on with a strong bounce off the bottom. The selling was overdone and due for mean-reversion as I noted on Wednesday, and the Nasdaq saw it’s highest bull volume print since 1/24 on Thursday in what appears to be capitulation and exhaustion from sellers. The bottom may be in for now.

Still, there aren’t many constructive chart patterns out there except for short-covering rallies in some of the most beaten down tech stocks. Those are playable, so I’ll be looking for the futures to stay green overnight into tomorrow and ease into some stocks if things are looking good on volume near the open. This view could change quickly as we’re only on Day 2 of the rally, so remember to manage risk with new buys.

Let’s get into some short-term setups!

Index Update

Nothing has changed here yet as the Nasdaq remains below a falling 21EMA with net highs/lows negative for 28 days straight, signaling strong caution on long positions. I will be watching for Net Highs this week and for an O’Neil style follow-through-day, which is eligible as soon as Tuesday.

The Nasdaq in put a bottom with climax volume on Thursday. It looks headed up to the 21EMA and orange resistance area, over 5% away, which shows how extended this index was. Keep an eye out for a follow-through-day as soon as Tuesday.

The S&P-500 bounce is slightly less convincing than the battered, tech-heavy Nasdaq, as volume was only average on Friday after the bottom. The support-turned-resistance in orange is next up as a test, followed by the 21-EMA in blue.

Earnings Reports

Noteworthy earnings reports this week:

• Monday: Tower Semiconductor (TSM), Danaos Corp (DAC)

• Tuesday: San Juan Basin (SJT)

• Wednesday: ZIM

• Thursday: Palo Alto Networks (PANW)

Many retailers report this week as well.

Stock Updates

Advanced Micro Devices (AMD) is a bounce play in last week’s letter that I picked up around $89 on the index bounce Friday. The official buy point was through the 21EMA at $93. I’ll look to add on a test of this area. $100 is the first target, and I’ll add through it if the indexes show strength, but if not, I’ll sell there.

Best Setups

The setups below are ideas, not outright buys; placing a trade is discretionary and depends on both the price action and volume. 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!

These setups are predicated on the market indexes continuing higher - if there is unexpected weakness, these will get smacked, so I’ll be watching closely.

Affirm Holdings (AFRM) gapped up big Friday after reporting better than expected earnings. The buy point is an undercut and rally through $26 on heavy volume. With the big % swings, it’ll be hard to set a stop on this one, so I’ll look for it to show profit right away and place stops close to entry price.

Roblox (RBLX) traded on it’s highest week of volume since it’s IPO after reporting earnings last week. This one could be bought around this area with the Opening Range Breakout entry tactic if volume continues to be stellar near the open. If missed on the first opportunity, I’ll look for a test of the 21EMA. Same idea for stops as AFRM.

Upstart Holdings (UPST) appears ripe for a short-covering rally after falling 50% in recent weeks. 30% of the float is short, which is high for a stock already down 90% from highs. I’ll look to buy a high-volume push up through $39 with stops just below $38.

That’s all for tonight! See you back here on Wednesday night for an update on our stocks.

Cheers,

Danny Deals