The Next Market Leaders - 9/11
The Next Market Leaders - 9/11
Markets showed strength on Friday after bouncing from deeply oversold conditions to back above the moving averages. The fact that indexes faked out with a failed bear-breakdown gives us potential for a rally as participants look to cover shorts and/or increase long exposure. Leading stocks putted around and even sold off, an odd dichotomy from the indexes, but held key levels into the close.
The fact that the reaction was positive to a relatively hawkish speech from Jerome Powell stating that the Fed will “keep at it until the job is done”, was slightly surprising, but not something to fight. The importance of the CPI reading due out Tuesday morning can’t be overstated and it’s hard to increase exposure much before then because it’s sure to swing the needle in one direction or the other. Based on recent action and heavily bearish sentiment, it seems as if it’s more likely to cause a bullish reaction unless the reading surprises high to the upside. Estimates are 8.1%.
For now, some stocks have crossed buy points and moved higher, and there are just a few new setups including ones we’ve been watching for a few weeks now. Let’s get into it!
Index Update
The Nasdaq is now above the falling 21EMA and well above rising short-term moving averages. Net high/lows remains down, but just slightly, with only 5 net lows on Friday. The McClellan is now completely reset at 24 after being extremely oversold at -200.
The Nasdaq regained the descending trendline and both the 50 and 21 MAs, exactly what I was looking for to prime a rally. There’s now a clear higher-low in place and plenty of fuel to move higher after a failed breakdown likely lured in a lot of bears.
The S&P-500 bounced perfectly off of the ascending trendline and regained both moving averages. It’s still below the falling 200-day moving average, and until price moves above this one so it can start rising, the long-term trend remains down. That doesn’t mean we can’t make money in the meantime, but rallies are prone to failure so stay on your toes and keep stops tight.
Stock Updates
Enphase Energy (ENPH) powered up off the 21EMA after consolidating nicely in the base above $272. It broke out through $306, but came all the way back down to the buy point and below to sweep stops on Friday. Still, but it ended up closing in the upper half of the candle which is still positive. I’ll look to buy back on another move above $309 with stops below $300.
First Solar (FSLR) broke out on volume through $130 and is looking more like the leader in solar after just a slight correction on Friday. I wouldn’t be surprised to see a test of $130 which could be an opportunity to buy if you missed out the first time. Keep stops at $125.
Chipotle Mexican Grill (CMG) is up 5% or 5x risk from the $1632 buy point. Take some off for profit if it can’t move up through $1725 quickly, and move stops up to even.
Scorpio Tankers (STNG) gapped up to the $43 buy point on Monday with great volume and closed up 3%. Stops just below $42.
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!
Celsius Holdings (CELH) is a leader that I noted to consider starting a position through the 21EMA around $100, which it powered through on Thursday. I’ll look to add above $108 on a high-volume breakout.
Array Technologies (ARRY) is still within the base pattern after getting stood up at the descending trendline. It’s a bit of a laggard, but can work if it breaks out through the bull flag at $23 on super volume.
Elf Beauty (ELF) has been showing relative strength for weeks as it’s sitting right below all-time highs. On Friday it printed an inside day, which gives a low-risk spot to enter if big volume can come in. The buy point is a break of $39.40 with stops at 38.50.
That’s all for tonight! See you back here on Wednesday night for an update on our stocks.