The Next Market Leaders - 6/29
Markets have showed their sustained weakness in the past few days, failing to hold the 21-day exponential moving averages after a 10% move off the bottom. This reversal was not too difficult to see coming after the faulty follow-through day on Friday. I thought we might at least test the 50-day MA first, but no dice.
I noted over the weekend that with net highs/lows were still down and barely any stock setups, I’d take profits quick and cut losses quicker. I sold my long positions on Monday for small profits. I also noted on Tuesday morning, before the indexes got walloped for -3%, that I was looking for low-risk short positions in SQQQ, CVNA, RIOT, and RIVN. Those closed the day down 9%, 23%, 8%, and 8% respectively. I caught RIVN.
It looks like we’re headed back towards the lows, though perhaps not in a straight line this time. Tonight, I’ll cover several short-sell opportunities that are setting up as there’s just not much money to be made on the long side until conditions change. Let’s get into it!
As a reminder, I post my morning thoughts and daily index review in the afternoon every day on Twitter, so make sure you're following me there for more frequent updates.
Index Update
The Nasdaq briefly managed to break through the falling 21EMA but quickly reversed before making any real progress. Net highs/lows remained negative, not even switching to a neutral reading, one of many red flags on the bounce.
It sliced back down through the 21EMA on high volume and closed even today after a choppy session. It’s again below all declining moving averages as well as the support area marked in orange. It looks headed back down to the yearly lows.
The S&P-500 also failed it’s 21EMA test, but held the key support area today. It has traded on lower volume than the Nasdaq on the past few red days. Still, I don’t see any reason to be long here.
Stock Updates
Vertex Pharmaceuticals (VRTX) hit the buy point of $280 with high volume last week but sold off to breakeven stops yesterday.
Seagen (SGEN) broke out on Friday past $175.50 on high volume and I sold on Monday for a small gain.
DAQO New Energy (DQ) moved up through the $70 buy point on super volume Monday and was up over 5% before selling off on Tuesday with the general market. Longs are not ready to work in this environment.
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 trade your own based on your rules for entering and taking profits, and always use a stop-loss!
These are the short-setups on my radar. Taking them is predicated on the general market acting weak and/or selling off.
Rivian Automotive (RIVN) is a short-sell that I mentioned on Tuesday morning and I caught it as it sliced through $28 while the indexes were selling off. It’s down over $2 and I already took some profits today. I would consider adding more on a test and fail of the upper trendline.
Riot Blockchain (RIOT) is another that I mentioned on Tuesday, but I missed the entry point as it broke down through the bear flag. I’d consider it on a test of the trendline if Bitcoin is not holding $20k.
Coinbase (COIN) recently announced layoffs and is looking super bearish as it’s building out a bear flag and failed the 21-day moving average test last week. That’s a lower-high on the daily chart. I’d short-sell it on a break of the bear flag around $48.50 or on a retest of the 21-day MA. With lots of eyes on it, this one could fake out a move down through the bear flag so keep stops tight.
Microstrategy (MSTR) is yet another Bitcoin-related stock that looks ready to break down. It already broke through the short bear flag but is still close enough for a low-risk entry point. I’d consider shorting tomorrow if it’s breaking down with BTC, or on a retest of the trendline, with buy stops at $185.
Digital Turbine (APPS) did well today up 5%, but there’s a big liquidity zone around $19, coinciding with resistance at the 21-day moving average. If it trades up to this area, it could be a great short-sell spot, provided the general market is acting weak.
That’s all for tonight! See you back here on Sunday night for an update on our stocks.