Markets changed character last week as many individual stocks made big moves and held those gains. In other words, trades have been working directionally for the first time in months. AEHR, the newsletter’s top setup last Sunday, crossed the buy point with volume and is up nearly 30%. Post-earnings movers have been working as earnings report surprise to the upside or aren’t as negative as once anticipated.

Potential leaders have been ripping for the past few weeks, and some general market weakness/rest, which looks overdue, should give those stocks some time to form short base patterns that we can trade. I will increase exposure aggressively if we do see constructive base patterns form and then breakout on leaders. Until then, faster trades for quick profits on selective stocks will continue to be my play.

Biotech and software stocks posted large weekly gains, while semiconductors are setting up as well. Solar remains in the mix but it’s choppy. I’ll cover potential leaders from these sectors and how I plan to play them. Let’s get into it!

Index Update

The Nasdaq is above the rising 21EMA with net highs/lows positive. Both indicators have been green for several weeks, showing internal market strength. The fact that the McClellan has remained overbought is another sign of market strength.

The Nasdaq is in a bit of a precarious position, extended above the 21EMA while coming up at the long-term downtrend line. A bit of a rest will give stocks a chance to set up properly, and will give this index future strength to break the downtrend line. As long as it remains above the 21EMA, that’s good.

The S&P-500 faltered a bit sooner than the oversold, tech-heavy Nasdaq and now it’s sitting just below resistance. Still, it remains positive above the 21EMA. Volume looks good as it’s declining into the consolidation and green days have had higher volume than red since the market bottom.

Stock Updates

Aehr Test Systems (AEHR) printed an inside-day and presented a solid risk-reward on a break of $11.53. which it powered through with stellar volume Monday, making it a clear buy. It’s now up nearly 30% and I noted to take some profit around 22%. Move stops up to profit on the rest and let it ride for now.

Funko (FNKO) reported earnings on Friday and fell back down to the buy point on a negative earnings growth. Hopefully you sold before earnings, as this is a good example of what can happen otherwise.

Upcoming Earnings

Earnings plays have been working and driving the market, so it pays to focus on these. Here are the ones I’m watching in order of importance, but I’ll also be screening for positive earnings reactions after-hours in all reporting companies.

• Monday: GFS, GBT, AMR, DOCN

• Tuesday: CELH, TH, WWE, ONTO, ARRY

• Wednesday: AOSL, BEAM

• Thursday: PFHC, VERU

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!

Cloudfare (NET) reported a positive earnings surprise and 54% revenue growth, closing up nearly 30% on Friday. For a quick trade, it tightened up just below $44.50 on the 30-minute chart. I’d consider some on a high-volume move through this area with stops $2 lower, and I’d look to take profit very quickly.

Monolithic Power Systems (MPWR) also surprised on earnings with 80% EPS growth, and gapped up to close strong last week. I’m watching for a big move through Friday’s inside-day high at $536 with stops at $522. This might need to consolidate a bit first, so watch for support around $500.

Photronics (PLAB) is losing some steam after a big move up, as volume is declining into the move. This needs a rest, at which point it should provide a better entry point.

Celsius Holdings (CELH) gapped down after poor earnings from MNST, but it held support at the gap-up region and closed in the middle of the daily range. This one reports earnings on Tuesday so we’ll need to watch and wait for a reaction. If earnings are solid, I’d look to buy a gap-up if it’s not too far above $110.

Clearfield (CLFD) has been a big winner from the breakout a few weeks ago, and volume has been steadily increasing in the stock 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.

Enphase Energy (ENPH) has wanted no business with testing the gap around $260 as it’s been grinding slowly higher. Watching this leader for a better buy point to form.

Note: There won’t be an issue for 10 days August 17-28 as I’ll be traveling abroad for my wedding!

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

Cheers,

Danny Deals