The Next Market Leaders - 9/5
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Markets sold off below the 50-day moving average as the Nasdaq closed down over 4% on the week. Most individual stocks followed suit, but a precious few continued to show relative strength by resisting the downtrend.
It’s not surprising that markets are backfilling after a big and fast move up from the lows set in June. What’s important now is a hold of the YTD lows for the indexes to potentially set higher lows. That would be very constructive if combined with good action in individual leaders, and it could be fueled by an economic catalyst like an improvement in CPI due out next Tuesday.
For now, all we can do is wait and watch the strongest stocks to see if they hold up during any further market distribution and break out on volume if/when the broader indexes move back up. Updates on what I consider to be the best and most actionable stocks in the market below. Let’s get into it!
Index Update
The Nasdaq remains below the 21EMA with net highs/lows down for 4 days in a row. The McClellan is extremely oversold, which could lead to a reprieve or bounce.
The Nasdaq fell below both key levels that I was watching last week, the 50-day moving average and rising trendline. That’s not a good sign in the short-term, but as long as it’s holding above the 11,000 level, a potential higher low is in play. It’s a good idea to keep very high percentages of cash until the 50-day MA is regained.
The S&P-500 also lost and failed it’s 50-day moving average, but it’s holding just above the rising trendline. I’m watching for a bounce in this area for a regain of the 50-day.
Stock Updates
Celsius Holdings (CELH) broke down below it’s 21EMA with 6 days in a row of lower prices. That’s not a great sign for this potential leader, but as long as it holds above the gap at $93, it can set up again when the market turns.
Clearfield (CLFD) miserably failed its test of the 21EMA and broke down lower. Taking if off my watchlist for now.
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) closed just below its 21-day moving average on below-average volume Friday. It’s still setting up nicely in the base above $272, so I’ll look to initiate a position on strength if it breaks out out through $306.
First Solar (FSLR) is still showing really solid relative strength , but there still isn’t much of a base to buy from. If the market turns and this breaks out on volume through $130, I’d consider buying. Otherwise, I’m watching for a better buy point after some rest.
Array Technologies (ARRY) swung low below the 21EMA but fought back and closed right at it. I’d consider buying a breakout through the bull flag at $23 but only if supported by high volume.
Chipotle Mexican Grill (CMG) reported good earnings a few weeks ago and now is consolidating within a flag just above the 21-day EMA. I’d consider buying a breakout through $1631 with stops just below $1600 for a low-risk trade.
Scorpio Tankers (STNG) is back on the radar as the oil transporter flashed new highs in relative strength last week, likely due to the ongoing energy situation developing in Europe that may create additional demand. It already has stellar earnings and revenue growth in the most recent quarter. I’d look to buy a high-volume move through $43 with stops at $41.
DHT Maritime (DHT) is in the same sector at STNG and reported a surprise profit on 8/10 with a good outlook. Now it’s consolidating just above the 21EMA with great volume characteristics: declining through the base, and 50-day lows on Friday as the indexes faced distribution. The buy point is a move through $7.76 with stops at $7.50.
That’s all for tonight! See you back here on Wednesday night for an update on our stocks.