After follow-through-days on the Nasdaq and S&P Tuesday, Wednesday brought distribution days, and Friday followed with swift failures of the lows before higher closes as the churning continues. A double bottom pattern could be in the process of forming. With plenty of opportunity to push price lower on volume, markets have thus far refused to do so, reaffirming my thesis that the bottom is in for now. More chop is in the forecast with Nasdaq futures down 1.5% tonight.

I’ve been away from the screens since Wednesday as I moved across the county and got my new office set up. Catching up on things today, the trading environment remains energy or bust for now. Oil and coal sectors account for 4 of the top 5 performing sectors over the past 5 days, while most growth stocks need much more time to recover.

Several energy stocks are tightening up and setting up nicely to break out. Let’s get into it!

Index Update

The Nasdaq remains below a falling 21EMA with net highs/lows negative for 33 days straight, signaling strong caution on long positions. No change in the Net Highs/Lows last week proved sentient in perceiving the market strength - I will be watching this for a positive change this week.

The Nasdaq is still churning within this relatively wide range below the declining 21EMA in blue. Within the range will be harder to play as there is considerable choppiness. A breakout through the upper resistance would be confirmation of a double bottom and signal some recovery in growth/tech. Look out for a follow-through-day as soon as Thursday.

The S&P-500 also undercut its YTD lows Friday and is looking to prove a double-bottom pattern. The resistance area lines up well with the declining EMA, marking an important area to break before any real progress.

Stock Updates

Advanced Micro Devices (AMD) was a bounce play that I picked up around $89 on the index bounce Friday. The official buy point was through the 21EMA at $93 and I added on a perfect test of this area. $100 was the first target where I sold for a 10% gain as the indexes were faltering.

Upstart Holdings (UPST) was ripe for a short-covering rally and I picked it up at $39 on Tuesday when volume came in. It moved up over 33% in three days where most profit should’ve been taken (I sold early, better than late). Breakeven stops are close to hitting on any remaining.

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!

Valero Energy (VLO) has performed well since reporting a 36% earnings surprise on 4/26 and is now tightening up with two inside days in a row. The buy point is a move up through $125 which gives us a solid risk to reward with stops just below today’s low at $121.50.

CVR Energy (CVI) is flashing a similar pattern with two inside days in a row on low volume after a high-volume breakout a few weeks back. Look for a move through $32.50 on heavy volume with stops around $31.

Vaalco Energy (EGY) has some work to do as it has recovered more slowly than others in the space, but it’s seeing an extreme dry-up in volume, indicating a lack of sellers below the 50-MA. I’d look to buy it if it broke out through the 50MA around $6.60 on high volume with tight stops.

SandRidge Energy (SD) is showing a volatility contraction pattern (VCP) and looks ready to break out if the group is performing. The buy point is $21 on high volume with stops just below $20.

Eqt Corporation (EQT) is a leader in oil & gas that deserves to be watched. The best buy points would have been the undercut and rally at $38 and the double-bottom buy point today at $43.50. Still, If it moves smoothly through $45.50 on heavy volume, I’ll look to buy with tight stops $1 lower.

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

Cheers,

Danny Deals