Markets have continued to deflate this week after the rout on Friday as selling has been met with lackluster buy volume and a dull reaction from bulls. It seems like everybody is still on vacation for the last week of the summer. Breadth has been poor with stocks getting hit across the board and the McClellan Oscillator at extreme lows of -190. Futures are down nearly 1% again tonight.

The leading stocks have been doing their best to hold up but certainly haven’t been making strides. On a positive note, many are holding their 21-day moving averages.

Group leadership is very thin. Tech, basic materials, and semiconductors look tired and are losing key levels. Solar is still showing magnificent relative strength so that’s been a focus and it should be a key sector to watch moving forward.

Tonight I’ll cover updates on potential market leaders including the stocks from Sunday night and a few more solar companies bucking the market downtrend. Let’s get into it!

Index Update

We are now back to red on both primary indicators, as you can see from the turbulence over the past two weeks. The McClellan oscillator is extremely oversold at -190, showcasing just how poor the breadth has been recently, but this can lead to a bounce in the short-term.

The Nasdaq tested the 50-day moving average as support on Monday, broke through it on Tuesday, and tested/failed it today as resistance. It closed at the lows today on below average volume and is at an area where it could either sell off below the rising trendline or trap bears for an under-cut and rally. We’ll see. Either way, look for the 50-day to be regained in short order, or stay out.

The S&P-500 also lost its 50-day moving average as support and is now trading down to the rising trendline. It needs to regain this average quickly or it will be trading below all declining key moving averages.

Stock Updates

Aehr Test Systems (AEHR) failed support at $16 as many semiconductor stocks have broken down over the past few days, many worse than this. Avoiding for now.

ShockWave Medical (SWAV) briefly moved up through the high of two inside days in a row, but volume wasn’t good enough through the pivot and it sold down. Still, it’s setting up well above the 21-EMA, so I’m keeping it on my radar.

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

Enphase Energy (ENPH) is still holding its 21-day moving average valiantly as solar stocks continue to show relative strength. I bought the dip to the 21EMA but was stopped out on the swing-low yesterday. I’ll look to initiate a position on strength if it breaks out out through $306, or a small buy in the base if there’s a market reversal on volume.

First Solar (FSLR) has flashed 8 days in a row of new highs in relative strength, seriously impressive action in this tape. There’s really not much of a base to buy from which makes it tough to start a position, but if the market turns and this breaks out on volume through $130, I’d consider buying. Otherwise, keeping an eye on it.

Array Technologies (ARRY) is another solar stock forming a little bull flag base here. Above the 21-day MA is positive. I’d consider buying a breakout through the bull flag at $23, but only if supported by high volume. Otherwise, a test and hold of the 21-day can be bought with stops at the low.

Celsius Holdings (CELH) is a market leader, but failed the back test of the trendline around $108-109. I stopped out on this buy for a small loss. It’s holding above the 21-day MA, and if it continues to hold, I’d look to buy a high-volume move through $108 with stops a few dollars lower.

Clearfield (CLFD) failed the 10-day moving average and now is testing the 21-day for the first time in its recent uptrend. I’m watching for a broader base to build out for a potential high-volume buy point.

Dawn Technologies (DAWN) is a more speculative, biotechnology stock, but it’s had a big move over the past several weeks and is tightening up on declining volume here. A breakout with volume through $24 with stops at $22.75 might be worth a try, but position size accordingly if you do get in.

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

Cheers,

Danny Deals