Hey everyone, and welcome to all of the new subscribers since the last issue! Hope the last two weeks have treated you well. For me, I’ve been in Greece for my wedding/honeymoon, and now I’m coming back to the markets refreshed and objective.

A new and important development is that a few leaders have been markedly decoupling from index movements. Indexes have been struggling to gain ground, accentuated by the walloping on Friday to the tune of -4% for the Nasdaq. The recent weakness has provided consolidation areas in leaders and potential areas to enter.

Still, we’ll need to watch for markets to hold key levels and avoid heavy selling volume for a favorable trading environment to continue. I’m 100% cash and will look to initiate some positions over the next few days/weeks if conditions don’t deteriorate.

Tonight I’ll cover what I consider to be the unadulterated market leaders and how I’m looking to position in them. Let’s get into it!

Index Update

Markets hit some turbulence this week, falling back below the 21EMA and net highs/lows pointing down for the first time since July 15th. This signals caution on long positions and to size down on new commitments.

The Nasdaq flirted with the 21EMA last week and ultimately closed well below it after Friday’s sell-off on unexpected hawkishness of the Fed. Still, volume was below-average on Friday, and price is still above the 50-day moving average. The is a key level to hold along with the uptrend line just below it, so I’ll be watching these levels closely into next week.

The S&P-500 was rejected perfectly at the declining 200-day moving average a couple weeks ago, serving as a reminder that we are still in a long-term downtrend. It lost the 21EMA on Friday along with the Nasdaq, closing at lows on below-average volume. It’s also still above the 50-day MA. A test and hold of this level would be a very positive sign for the short-term rally and could be a great spot to purchase leaders.

Stock Updates

No updates today.

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!

Celsius Holdings (CELH) is undoubtedly a market leader with stellar earnings and revenue growth. It broke out to new all-time highs around $110 last week, and held that level to close the week even with indexes down big. Another back test of the trendline around $108-109 would be a low-risk spot to start a small position with stops a few dollars lower.

ShockWave Medical (SWAV) is another market leader that has completely shrugged off the market weakness thus far, giving it the feeling of a ball held underwater. It has printed two inside days in a row. I’d look to start a position on a high-volume move above $312 with stops at $302.

Clearfield (CLFD) has consistently printed new highs in relative strength over the past few weeks and is up nearly 90% in that period. It sold down on Friday with very light volume, and is sitting right at the 10-day moving average that has held through the entirety of the uptrend so far. This could be a good place to buy with stops at $120, or else I’ll keep watching for a broader base to build out.

Aehr Test Systems (AEHR) is building out a base pattern above the 21EMA while the market sells off. I’m watching for either a test of the 21EMA near $16 to start a position, or to buy strength on a high-volume breakout through $18.50. I would like to see the price tighten up and for volume to contract, as volume has remained above-average throughout the base so far.

Enphase Energy (ENPH) is one of the hottest stocks in one of the hottest sectors right now (solar). It’s consolidating quite nicely above the 21EMA on decreasing volume after gapping up on a stellar earnings report in July. I’ll be watching for another test and hold of the 21EMA to initiate a position and to add on strength if it breakouts out through $306.

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

Cheers,

Danny Deals