The Next Market Leaders - 8/10
Markets gapped up big today after a better than expected CPI reading for July that came in at 8.5% vs. expectations of 8.7%. Participants seem to be taking this as a sign that inflation has peaked and that the Fed will pivot away from more rate hikes. That seems ambitious to me, but I’m taking it one day at a time rather than arguing with the market.
It’s been difficult to add long exposure this week as there was significant weakness on Monday and Tuesday that was enough to trigger stops, and then a big gap up today that was hard to catch. I will continue to exercise patience and wait for the right moment to get heavily invested. AEHR has been an outlier as a huge, consistent winner up over 57% from last Monday’s buy point.
Many other potential market leaders are flying on volume and looking fantastic, but now we need to wait for proper buy points to get involved. I’d rather miss out than FOMO in and lose money on these extended setups. There should be plenty of stellar opportunities for us over the next few weeks/months, if and when the market comes back in a bit to develop a second wave of demand without the rug getting pulled out. I’ll cover many of these potential setups below. Let’s get into it!
Both market indicators have been green for several weeks, showing internal market strength, and the McClellan has remained overbought above 100 for several weeks is another sign of market strength.
The Nasdaq gapped up through the year-to-date downtrend line but is sitting right at resistance at the 150-day moving average. The level has proved important in the past, so it’ll be interesting to see how the index reacts at this level to close out the week. Volume was good today, but yesterday’s red day was higher.
The S&P-500 gapped up above the resistance line that it had been struggling with until this morning’s reaction to the CPI print. Now it’s also right at the 150-day moving average resistance level, so watch to see if it comes back in to hold the resistance-turned-support.
Aehr Test Systems (AEHR) is up a whopping 50% from the buy point last Monday. I noted to take some profit around 22%, and now I would move stops up to today’s low around $16.25. Something is going on with this stock as it hasn’t taken a break at all.
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!
Celsius Holdings (CELH) held support at the gap-up region after reporting amazing earnings to the tune of 999% EPS growth and 137% sales growth, surprising by 50%. Those aren’t rookie numbers, and it could have more growth coming. I’d consider starting a position on a breakout through today’s high at $105 with high volume and stops just below $100. Add above $110.
Monolithic Power Systems (MPWR) also surprised on earnings with 80% EPS growth and is consolidating a bit here. Support at $500 held like a charm. I’m watching for a big move through Friday’s inside-day high at $536 with stops at $522.
Clearfield (CLFD) has been a big winner from the breakout a few weeks ago, and volume has continued to rapidly increasing in the stock (volume ATHs 3 times in the past two weeks!) which is a great sign of potential leadership. This is far too extended beyond the moving averages to consider here, but I’ll be watching for a consolidation to get involved.
Enphase Energy (ENPH) is slowly grinding higher as solar continues to be a potential leadership group. ENPH is the best of the bunch. Watching this leader for a better buy point to form, but you could try a test of $290 if it comes again. Otherwise, a high volume breakout through $310 would be a buy, though I’d like to see a bit more rest first.
Cloudfare (NET) reported a positive earnings surprise and 54% revenue growth, closing up nearly 30% on Friday on the highest volume in a year. It came back in with the market weakness and then exploded again today, testing Friday’s close as support nearly to the penny in early trading. This one could be in for a move up to $100.
The Trade Desk (TTD) is a similar setup to NET above with an earnings surprise catalyst, but it’s even better since it’s already above the 200-day MA. Look for a move above today’s high at $75 to buy strength, but a few days pullback (and hold of the 200MA) might be better first, so that it develops a clear setup like NET did.
Photronics (PLAB) held the 21-day EMA after fading with the market weakness and recovered handily today. Now it’s setting up for a bull-flag breakout through the descending trendline around $24. I’d like to see more of a rest first and some volatility contraction so that a tighter stop-loss can be implemented.
Note: After this Sunday’s issue, there won’t be an email for 10 days August 17-28 as I’ll be traveling abroad and taking time off for my wedding/honeymoon!
That’s all for tonight! See you back here on Sunday night for an update on our stocks.