The Next Market Leaders - 5/7
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Markets rebounded on Friday as individual stocks continue to spin in circles, but it feels like the bulls are grindingly winning the battles in the trenches. Companies demonstrating capital efficiency through growing earnings, sales, and estimates have been rewarded, but follow-through in these stocks remains hard to come by, and proper setups remain scant with volatility high.
I’ve had much more success trading Nasdaq futures than individual stocks in the past few months, so I’ve been doubling down on honing my edge there. Focus on what’s working for you, whether it’s a specific sector, setup, or ticker. Until there’s a clearer direction, growth stocks will remain hit or miss and tough to get aggressive on. I’m staying vigilant for a change in the form of breadth improvement, better chart patterns in high-quality issues, and trades working. I haven’t seen much evidence of that yet. I’m happy to miss the small percentage of trades that work in the meantime so as not to get chopped up.
Tonight I’ll cover the recent action in the indexes, a few earnings gappers from last week, the stocks that seem closest to being buyable, as well as updates on last week’s charts. Let’s get into it!
Index Update
Net highs and lows have only been positive three days in a row for two days since 2/17. This dashboard showcases the market indecision as it has been above and below the 21EMA with net highs/lows oscillating aggressively.
The Nasdaq posted an undeniably strong close after bouncing off the 21EMA and is the leading index. Volume was just average on Friday, but it’s now sitting right at YTD highs. Let’s see if it can (finally) move decisively up and out from the trading range it’s been in since the start of April.
The S&P-500 once again found support near the 50-day moving average after closing below the VWAP from all-time highs in purple. The volume characteristics aren’t great, with higher volume down-days than up-days, and I’m not sure that the increasing volatility in recent weeks is positive. The turmoil in financials is adding to the chop in this index.
Earnings and Macro
Many more companies report earnings this week. Here are my highlights:
Monday: HIMS, SWAV, INTA
Tuesday: RIOT, AXON GFS, WYNN, SQSP, DUOL
Wednesday: CPI Data at 8:30am, ALGM, MAXN, MARA
Thursday PPI and Initial Jobless Claims, ARLO
Stock Updates
On Holding (ONON) moved out from Thursday’s inside-day high but got held up at 52-week highs after breaking out initially. I’m watching for another strong move through $34, though it just hasn’t been clean lately.
Super Micro Computer (SMCI) broke out and closed the week strong after earnings, but it still needs to pullback and consolidate a bit from here. Not quite ready for an entry until it puts in a short base for a few days to set up a potential entry point and an area of support to manage risk.
DraftKings (DNKG) gapped up and closed at 52-week highs after beating on revenue expectations and guiding revenue higher for the quarter. It’s just getting started in a new uptrend up the right side after a big correction over the past few years, so there’s plenty of time to get involved. Waiting for a better setup here, but it’s one to watch.
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!
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 move through the pivot point at $200, though volume has to be high, as volume has been declining for the past several weeks.
Hims & Hers Health (HIMS) is forming a slight sloppy ascending triangle, but it looks good heading into earnings tomorrow after the close. Watching the report and reaction, and would consider buying an opening-range breakout on a gap-up if the market is also moving.
HubSpot (HUBS) beat earnings/revenue expectations while raising earnings and revenue guidance, but has only had a decent reaction in the stock so far. It likely needs at least a few more days to set up a pivot point, and it’s still over 80% from all-time highs, so there’s no rush.
Riot Platforms (RIOT) is a name that moves, and it’s tightening up nicely between the AVWAPs from the recent low and recent breakout while seeming to find support at the 21EMA. It reports earnings on Tuesday, after which I’m watching for a high-volume breakout through $12. It’s closely tied to the price moves in BTC.
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.