The Next Market Leaders - 5/3
Markets sold off on the interest rate raise from the FOMC and hawkish commentary from Chairman Jerome Powell this afternoon. Renewed fears of contagion in the financial sector are alight in post-market trading as PACW is down 55% on its announcement that it’s “exploring strategic options”. WAL is down 35%. Things could get worse from here.
During times like these, it’s great to have a system that protects risk systematically. There has been a persistent lack of stocks setting up how I like them (consolidating in logical, sound bases on declining volume and volatility), so I’ve been largely in cash for the past several weeks, and entirely for the past week.
My plan remains to watch earnings reports and reactions over the next few weeks, prioritizing the ones that make big moves with volume on positive results. There some earnings winners already materializing, but now they need to present solid risk to reward entry points, and the broader market still needs to improve. I’ll cover a few updates and scant setups below. Let’s get into it!
The Nasdaq closed slightly above the 21EMA for Day +5 in the cycle, though once again, the story is in the market breadth; net lows accelerated back into triple digits yesterday and followed up with -64 today.
The Nasdaq briefly traded into YTD high territory before selling back down into the consolidation area, with today marking a distribution day on above-average volume. Be careful in this area as “from failed moves comes fast moves.” The 21EMA looks like it will be tested as soon as tomorrow.
The S&P, once again, looks to have printed a lower-high on the daily chart and closed back below the 21EMA, marking an end to the recent rally. This echoes my note last week when it was in a similar position, but it shook out shorts and trapped bulls one last time before perhaps declining in earnest. For now, it’s still above the longer-term moving averages.
Earnings and Macro
Thursday: Initial Jobless Claims at 8:30am, AAPL, DKNG, IAS, FTNT, LNTH, FOUR
Friday: Nonfarm Payrolls, Unemployment Rate at 8:30am
NVIDIA (NVDA) was one I noted on Sunday “could be ready to continue higher with a breakout through $280”, and it went first thing on Monday morning with a nice move on volume. Given the general market action after Monday, it pulled back, and stopped out for breakeven. Not surprised - continuing to watch.
On Holding (ONON) is still consolidating within the recent range on low volume. The inside-day buy point from Monday didn’t work. It’s still holding up better than most around the market and holding the $32 spot, but now I’m waiting for another potential entry point if the general market improves.
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!
Super Micro Computer (SMCI) jumped 28% today after guiding much higher on earnings and sales for the current quarter, teasing their “next generation product lines for AI applications”. It needs to pullback and consolidate a bit from here, but I’m keeping it high on the watchlist for a potential entry.
HubSpot (HUBS) reported earnings tonight and beat earnings/revenue expectations while raising earnings and revenue guidance. Can’t ask for much better than that. It’s up about 5% post-market. It’s hard to buy a gap-up in the current environment, but I’m watching it in tomorrow’s trading depending on how the market reacts. Otherwise, I’ll watch for an entry post earnings gap.
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 Sunday night for an update on our stocks.