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The Next Market Leaders - 7/6
Markets have been trading in a largely trendless, choppy fashion for the past few weeks as the summer lull is in full force. Emotional, illiquid, news-driven trading is on display. These conditions are treacherous for trend followers, but can provide opportunity for fast day traders. For me, I’ve found that less is more in this environment. I’ve been taking fewer trades by only executing on high-conviction setups that tend to show a profit right away. Those are hard to come by right now.
Though market internals look to be (slightly) improving, it’s still early days in the potential bottom formation. Solid setups are extremely sparse as the market appears to be holding its breath in anticipation of the CPI print next Friday. Until there are more setups and a clearer trend, I’m planning on maintaining a very high percentage of cash.
Several short-sell setups from last week have worked decently well, so I’ll cover updates on those along with a few biotech stocks that I’m watching. Let’s get into it!
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The Nasdaq close just above the 21EMA today, an initial sign of progress, but net highs/lows remain negative. This signals caution on long positions. You can tell by these readings that it’s not yet time to get too aggressive.
The Nasdaq is leading the move higher and has formed what looks to be a higher-low area on the daily chart. The next step is for it to prove a higher-high by breaking out through the high from last week, an area that coincides with the 50MA. If it were to hold the 50MA as support after breaking out, that would go a long way towards proving strength, but the 200MA remains far overhead. Volume is light so far.
The S&P is trailing the Nasdaq as it hasn’t yet broken above the 21EMA, but it has also formed a higher low area. The support and resistance areas that I’m watching are noted on the chart.
Digital Turbine (APPS) perfectly hit the liquidity zone at $19 that I noted last week, and it sold off immediately. I caught it around $18.75 for a short-sell with stops at the high of day. Stops held and it’s down nearly 5% after closing at the daily lows. Move stops to even and cover faster if indexes are bouncing hard.
Rivian Automotive (RIVN) was a short-sell stock that I noted last week that sold off through the bear flag, but refused to move lower on light volume. I closed my position going into the holiday weekend for a cool 8.5% profit.
Coinbase (COIN) sold through the bear flag and continued 6% lower before finding support and bouncing back. I wasn’t surprised as I had noted that it “could fake out a move down through the bear flag so keep stops tight.” I netted a 2% profit on the trade.
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!
Halozyme Therapeutics (HALO) is one of many biotechnology stocks that is showing relative strength. It found support at the rising 50-day and 21-day moving averages and is just 4% off 52-week highs. The buy point is a move up through $47.40 on high volume with tight stops at $46.75.
United Therapeutics (UTHR) is another biotech that touched all-time highs today and is trading on excellent volume characteristics. You can see the accumulation with the high-volume up days contrasted by below-average volume through the consolidations. The buy point is a breakout at $243.50 with stops at $237.
That’s all for tonight! See you back here on Sunday night for an update on our stocks.
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