The Next Market Leaders - 6/4
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Markets rallied on Friday to close out the week as the lagging S&P-500 and Russell 2000 took the baton from the leading Nasdaq. Volume could have been better to confirm the strong price moves, and even though it’s undoubtedly positive action, it leaves us extended in the short term, due for a pullback.
A proper pullback would give time for leaders in semiconductors and AI to form constructive bases and prove out a wave of secondary demand. In the meantime, other sectors are looking to pick up the slack as breadth improves, but buying here can be vulnerable to a broader market pullback. That doesn’t mean to hold off entirely, but be vigilant and ready to protect positions faster than normal.
Tonight I’ll cover updates on the indexes and the top setups that I’m watching early into this week. For the rest, patience remains the name of the game for me. Let’s get into it!
Note: There will be no issue on Wednesday night, but I’ll be posting more regularly to my Twitter page for updates on setups.
Index Update
The Nasdaq closed Day +20 in the cycle above the 21EMA with net highs/lows flipping back positive on a strong day. The last two previous cycles ended at Day +29.
The Nasdaq continued up through the resistance area to close the week strong, though on markedly lowered volume at YTD highs. It hasn’t paused much from the gap-up on NVDA’s earnings last week and is getting extended here as the price increase accelerates.
The S&P-500 finally broke out in earnest from the 4,200 level that we have been watching, closing with conviction, though volume could have been much better on a day like that. It’s coming up on an area of historical resistance.
Stock Updates
Super Micro Computer (SMCI) is still up 56% from the $140 pivot point and pulled back a bit on lower volume Friday. Stops below the relevant higher-low area, which is around $215. Though it could keep going, it’s best to protect profits while it’s extended here.
Elf Beauty (ELF) gapped up after a solid earnings beat and raise, powering to all-time highs at $97 heavy volume and is up 8%. Keep stops just under $100 to protect profit.
Alphabet (GOOGL) briefly traded above the $125 area, but volume finished well below-average and I noted that it would be key to look for a high-volume breakout. I’m still watching this one for a strong move through Friday’s high.
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!
Chipotle Mexican Grill (CMG) is building a tight, flat base after the power earnings gap. Pivot point moved up to $2,100.
Microstrategy (MSTR) is flagging and declining in volatility with volume declining on the daily chart. This one is closely correlated to the price of Bitcoin, but has the potential to lead BTC price with others in the sector setting up too (RIOT, MARA, COIN). Watching for a move through $310 with stops at $290 or better.
Open Text Corp (OTEX) is developing a nice pattern after the earnings gap, basing on declining volume. It held the 21EMA as support and is now back above the rising VWAP from earnings with above-average volume coming back in. Pivot point at $42.30 with volume.
That’s all for tonight! Reply to this email or hit me up on Twitter if you have any feedback or questions.
The Next Market Leaders - 6/4
I entered goog when it moved above 118 but it seemed extended so I entered small. Keeping and eye out for any slight pull back to add