Markets failed to recover meaningfully after a poor CPI print, falling -5% to close at the the lowest daily price since July 19th.

With all eyes ahead to the Fed meeting on Wednesday afternoon, it’s more of the same as far as this year is concerned: a news-driven market that doesn’t let you get too exposed given the nature of the wild swings that occur during macro releases. With that in mind, I’ll be keeping a high percentage of cash at least until Thursday. Right now I’m in 100% cash.

Leadership is thin while breadth is declining. There are only a handful of stocks that are still holding up after the recent distribution, so there are a lot of eyes on them, decreasing the probability of trades working at traditional pivots. In any case, there’s no need to rush back in with the market below all key moving averages. There remains a lot to prove.

Still, those leaders are holding up well. I’ll cover them tonight - let’s get into it!

Index Update

The Nasdaq is below the falling 21EMA, the declining short-term moving averages, and net high/lows are back to red after four days in a row. The McClellan is at -90 which is an oversold reading that could lead to a bounce.

The Nasdaq gapped below the prior week’s lows on Friday and had several opportunities to push lower throughout the day, but in the final hours there was a nice push to close at the high of the daily range. It sets up a potential undercut and rally scenario with an entry back into the box.

The S&P-500 is now below the ascending trendline along with all of the moving averages. It needs to regain this area or could be in store for a test of the YTD lows.

Stock Updates

First Solar (FSLR) printed a bullish outside-day on high volume after testing the pivot point at $130. The add point is a high-volume breakout at $140.

Elf Beauty (ELF) held stops at $38.50 on Friday for now. This might not hold up much longer unless the market can bounce.

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 consolidating just below all-time highs after stopping out the previous ATH buy. There was a new high in relative strength set on Friday. I’d look to buy a heavy-volume move up through $325 with stops at $310.

Celsius Holdings (CELH) is still consolidating within its box between $93 and $110 while showing relative strength. I’ll look to buy back in on a high-volume move through $108 which is near the all-time high.

Digi International (DGII) flashed an inside-day on Friday along with a new high in relative strength. It’s a high tight flag candidate after rising from $19 to nearly $38 and could lead if the market turns. I’d consider buying a starter position on a move above Friday’s high at $35 with stops at $34.

H&R Block (HRB), is still consolidating and finding support at the 21-day EMA along with three days in a row of new highs in relative strength. I’d look to buy a move through $45.75 with stops at $44.30 for a low-risk trade.

Axsome (AXSM) is a biotechnology stock that held the 21EMA after a big move a few weeks ago. The buy point is a breakout through $65, but volume has to be super. It could reverse quickly so protect your cost basis.

Stem (STEM) provides energy storage solutions and a platform to optimize energy use, a product the market needs given the energy crisis internationally. It’s another high tight flag and the buy point is a breakout through $17 on very high volume with stops at $16.

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

Cheers,

Danny Deals