The Next Market Leaders - 5/31
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Markets cooled off to start off the week as macro uncertainties and debt-ceiling deal discussions continue. Even if a deal does come in before the 6/5 deadline, which is still a question mark, it could be a “sell the news” event in the markets. Semiconductors have fallen back to earth a bit after large, fast runs that quickly led to extended prices. The moves in these stocks might not be over, but they need time for the volatility to calm down and set up new pivot points.
Outside of the handful of top names that we have been tracking (mainly SMCI and NVDA), there’s not much following through quite yet, and the fact that breadth data continues to be poor supports that view. Net highs/lows printed the lowest reading since the beginning of the month.
Patience remains the story. There aren’t many new setups near buyable position to close out the week, so tonight it’ll mostly be updates on our previous stocks and indexes. Let’s get into it!
Index Update
The Nasdaq closed Day +18 in the cycle above the 21EMA, but net highs and lows accelerated to the downside with a reading of -128. That’s the lowest reading since May 4th despite the index being near YTD highs.
The Nasdaq got rejected right at the resistance area I noted on Sunday, with two days in a row of high-volume distribution to kick off the short holiday week. It’s still extended above the 21EMA and needs to put in some lighter-volume consolidation from here, which would allow more stocks to pull back and set up properly.
The S&P-500 fell back below the key 4,200 area on above-average, distribution-day volume today. It’s not great that it wasn’t able to break through this area even with the burst of strength in the Nasdaq. I’m watching to see how it acts around the 21EMA, but I wouldn’t be surprised to see a broader consolidation down to at least the 50MA.
Earnings and Macro
Thursday: Initial Jobless Claims at 8:30am, IOT, ZS, AVGO
Friday: Nonfarm Payrolls and Unemployment Rate at 8:30am
Stock Updates
Super Micro Computer (SMCI) is still up a whopping 58% in two weeks from the $140 pivot point. Move stops up to the relevant higher-low area, which is just under $216. Though it could keep going, it’s best to protect profits while it’s extended here.
NVIDIA (NVDA) is the biggest leader in this recent market rally and is looking vulnerable after the significant earnings gap. It’s still holding the gap low at $366, but has seen two days in a row of high volume distribution and is now below the AVWAP from earnings. In any case, there’s no setup to buy at this point.
Elf Beauty (ELF) gapped up after a solid earnings beat and raise, powering to all-time highs at $97 heavy volume and is up 7%. Move stops up to just under $100 to protect profit if the market turns down.
Chipotle Mexican Grill (CMG) took a peak above the inside-day pivot point around $280, but volume was low and lacking conviction. Still watching this area, but it’ll have a hard time making much progress without the market tailwinds.
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!
Alphabet (GOOGL) is building a short bull-flag pattern above it’s AVWAP from earnings a few weeks ago. This one has leadership potential with it’s AI product developments even if it is a mega-cap. The 13% move in the past two weeks could look to continue on a high-volume breakout through $125, though some more time in the flag would be best.
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.