The Next Market Leaders - 9/7
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Markets bounced to the tune of 2% higher today as solar leaders showed the way on volume. We’ve been focusing on solar stocks for the past several weeks as they have been building quiet bases while flashing high relative strength in the market volatility. As soon as the index pressure lifted, they were bound to break out, and that’s exactly what happened today with ENPH, FSLR, and others.
There’s still a lot to prove as indexes are below all key moving averages and there aren’t too many institutional-quality names leading higher. There are a few, but setups are still sparse. CPI data is due out next Tuesday which will shake things up in one direction or the other. I’m holding off on getting aggressive, but dipping a few toes in.
Tonight I’ll cover updates on market direction, many stocks that passed buy points from Sunday’s letter, and a few others setting up. Let’s get into it!
Index Update
The Nasdaq remains below the 21EMA with net highs/lows down for 6 days in a row. I noted Monday that the McClellan is extremely oversold which could lead to a bounce, and it did. There’s more to room to go before this indicator is reset.
I started tracking the direction of the short-term moving averages (3 and 5 daily MAs) on my shorter time-frame S&P futures chart. The position of the SPX price in relation to these moving averages, along with which direction they are moving, gives me a faster sense of the market direction and situational awareness for buying or selling. I’ll be tracking this moving forward.
Today price moved up through the declining short-term MAs, a good first start in a potential trend change.
The Nasdaq bounced today, but is still below all key moving averages and the former ascending trendline. It could mean a higher-low is in place and right now I’m operating with that mindset. A break of yesterday’s low is where this is invalidated. We’ll need to see some follow through in the next few days and a regain of the moving averages.
The S&P-500 bounced right off of the ascending trendline which would’ve been a great spot to start some exposure with low risk. Still, it remains below the 50-day moving average and the declining 21EMA. A quick regain of these MAs would be very bullish.
Stock Updates
Enphase Energy (ENPH) is one that consolidated nicely in the base above $272 and I noted to initiate a position on strength if it breaks out out through $306. Super volume showed up right at the bell, so I bought a bit earlier near $298 and added at $306. It closed up 4%. Stops at $297.
First Solar (FSLR) broke out on volume through $130 where I noted to consider buying. It closed up nearly 4% from the buy point. The way this one trades, I wouldn’t be surprised to see a test of $130 in the next day or two, which could be an opportunity to buy if you missed out the first time. Stops at $125.
Chipotle Mexican Grill (CMG) was consolidating within a flag just above the 21-day EMA, and today it moved up through $1631 where I noted to buy for a low-risk trade. It closed up 3%. Stops at $1600.
DHT Maritime (DHT) gapped up too far past the buy point at $7.76 on Monday, so I avoided it. It looked good yesterday, but then gapped back down today.
Scorpio Tankers (STNG) briefly touched the $43 buy point on Monday, but volume was too low and it quickly sold back down. Keeping an eye on this one for big volume to come in past the pivot.
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!
Array Technologies (ARRY) is still within the base pattern even after moving up 6% today on group strength. This solar stock looks ripe for a breakout through the bull flag at $23, but I’d only buy only if supported by high volume. It might be a laggard given that some other solars have already reached new highs, but could still work.
Celsius Holdings (CELH) bounced with the market today, perfectly holding above the gap at $93. That gives it a good setup moving forward. I’d consider starting a position through the 21EMA around $100, and adding above $108.
That’s all for tonight! See you back here on Sunday night for an update on our stocks.