Markets seem to have settled into a summer lull, with volume down across the board for the past few weeks on choppy, ranging price action. Yesterday and this morning, many stocks broke out successfully and appeared to be following through before reversing course today to erase gains. Conversely, many of our energy setups have seen super gains from the buy points, though the sector looks due for a rest.

Over the past week and change, I have looked to increase my exposure in sectors outside of energy in anticipation of a broader market bounce, but have been stopped out in quick succession from most starter positions. It pays to listen when the market sends you signals, so I’m back to holding a vast majority of cash while waiting for better setups and a better environment to materialize.

In the meantime, what we can be doing is looking out for potential market leaders by scanning stocks with relative strength and constructive price/volume action. This group continues to be dominated by energy stocks, as you will see below, along with a few others. Let’s get into it!

Index Update

The Nasdaq remains just above a rising 21EMA and the net highs/lows are still neutral as this number oscillates with the choppy market.

The Nasdaq continues to hold the 21EMA as support - yesterday gapped down at the open but there was an immediate reaction to move back up through support, and it held into the close. Things are positive while it remains in this range, but stocks won’t start to move directionally until it breaks one way or the other.

The S&P-500 is also consolidating above the 21EMA, but on even lower volume than the Nasdaq. Two of the past four trading days were the lowest volume in 50 sessions as indicated by the gray volume bars. I’m looking for a decisive move up through the resistance line in orange.

Stock Updates

Diamond Offshore Drilling (DO) has been the winner of the week as it crossed up through the buy point we’ve been eyeing for a few weeks at $8.26 on heavy volume. Very strong follow-through volume came in today and it’s up over 19% from the buy. Take half off for profit and move stops up to even.

CNX Resources (CNX) broke out through the $23 buy point and held official stops at $22.20, but I placed my stops higher and got shaken out yesterday on the swing-low. It’s up 2%.

Rattler Midstream (RTLR) broke out yesterday through the $17.50 buy point and closed 2.5% higher today.

Valero Energy (VLO) is up 15% from the buy point a few weeks ago. I’d take most off for profit here if you haven’t already.

BP Prudhoe Bay Royal Trust (BPT) is up 25% from the noted buy point just 6 days ago. Two middling closes in a row tells me that it might be time for some rest, so take some profit here.

CVR Energy (CVI) is up 31% from the buy point from a few weeks ago, and I noted to take some profit at +20%. I’d look to take off most remaining as it’s extended and might base for a bit.

Advanced Micro Devices (AMD) crossed through my $104.50 buy point last week and stopped out today. I added today as it came back up through the resistance area, but that buy stopped out as well. Avoiding for now.

Ardmore Shipping Corp (ASC) crossed above the $8 area where I noted to consider, but hasn’t been able to hold it even with high volume.

Best Setups

The setups below are ideas, not outright buys; placing a trade is discretionary and depends on both the price action and volume. In order 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!

Kosmos Energy (KOS) is setting up a nice pattern here just below 52-week highs. It has held the $8 zone as support in the past two sessions. Energy as a whole might need a rest, but I’d look to buy a breakout through $8.50 with high volume or another orderly test/hold of $8.

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

Cheers,

Danny Deals