Markets have rallied and closed above their respective 50-day moving averages for the first time since early April. Now we need to see individual stock setups and leaders to start getting more aggressive. Make no mistake: it still hasn’t been easy making money over the past few weeks as we are still in an incredibly choppy, news-driven environment. Today the Nasdaq dipped 1% intraday on news that Google was pausing hiring.

An interesting observation is that during this rally, the stocks with the biggest gains on the highest volume are not potential market leaders, they are previous market leaders that have been heavily pummeled and have lots of short-sellers in them. This signals to me that it may be a short-covering rally rather than the start of a long-term uptrend.

At this point, markets look overbought, and some consolidation before moving higher would be a healthy sign. This should give an opportunity for more stocks to tighten up and provide lower-risk setups to engage in. For now, I’ll cover that stocks I’m watching, keeping in mind a pullback might be imminent. Let’s get into it!

Index Update

The Nasdaq is now above the rising 21EMA with net highs/lows positive. This is the first time that both of these indicators have been green since April 4th. The McCellan Oscillator is at 140, an overbought reading that tells us the market could use a rest.

The Nasdaq powered through the 50MA and the first area of resistance that I noted on high volume. It closed just below the second resistance area. I think that high buy volume will need to continue in order to push through this area. A test of the support and the moving averages would be constructive for a longer-term move.

The S&P-500 tested and held the 50-day moving average today, and closed above resistance on average volume. Look for it to continue to hold these levels.

Stock Updates

Li Auto (LI) passed up through my buy point at $39, but came back in on the same day. Now it’s not acting quite right, along with many other China names, as it slipped below the 21-day moving average. Watching, but avoiding for now.

Chewy (CHWY) has passed up through the inside-day high at $43.40 three days in a row, but volume has been low each time. This one is just chopping around below the 200-day moving average while it decides a direction. Avoiding for now.

Sierra Wireless (SWIR) broke out of a shallow cup base on high volume, but hasn’t yet followed through. I noted that it could be bought on a powerful move above $26.40. It has failed above this area three days in a row. Watching for higher volume through $27 for a buy.

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 base the trade on your own rules for entering and taking profits, and always use a stop-loss!

Target Hospitality (TH) has moved up over 100% in just the past two weeks, and now is consolidating on lighter volume, making it a candidate for a high-tight flag. The buy point is a heavy-volume move through $12.60 with stops just below $12.

Scorpio Tankers (STNG) is the crude shipper we were watching a few weeks ago, and now it has come roaring back after holding the 50-day moving average. I’m watching for more volume to come in above $38.50 for a buy, but some rest might be better given that it’s extended on the daily chart.

Occidental Petroleum (OXY) is another oil & gas name that is fighting back through its 50-day moving average. I like this one for an early cheat buy on a test and hold of $62.50-$63, after which it needs to move back up the right side of the base which should provide a better opportunity to add.

Bumble (BMBL) is now above the rising 21MA, 50MA, and falling 200MA. It has positive earnings and a good growth story, but a lot could depend on Snapchat’s earnings report tomorrow. If SNAP’s report is positive, I’ll watch this one for a breakout above $35.

Photronics (PLAB) has been showing relative strength ever since a solid earnings report last quarter, and now looks ready to make a move along with semiconductors as a group. I’m looking to buy a pilot position on a move above $22, but I would prefer to see a test of the trendline near $20 first.

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

Cheers,

Danny Deals