The Market:
The Nasdaq rallied over 5% this week with the S&P not far behind staging a day 7 follow through day. A major rally took place Friday as the Fed’s Daly mentioned the risk of over tightening and the possibility of only .50 or .25 basis points in the future.  All the major indexes staged positive outside reversals on those comments and managed to close above their 21 ema which have been acting like a brick wall of resistance this whole bear market. While the follow through day and closing above the 21 ema was positive, we did have net new lows expand and volume is likely skewed due to options expiration. Next weeks action will be critical in determining the strength of this move as we have an action-packed week of mega cap earnings and the Fed’s preferred measure of inflation PCE. It will be important to avoid distribution right away as distribution right after a follow through day increases the odds of failure.
The dollar is also sitting right on an upward sloping trendline as it staged a negative outside reversal on Friday. The bulls will need to see continued weakness in the dollar to sustain a move higher.
Secondary Indicators:
Put Call Ratio: Neutral reading at 0.97
Percent of Stocks above the 50 day: Nasdaq - 25% S&P – 25%
Percent of Stock above the 200 day: Nasdaq - 23% S&P - 20%
Looking Ahead to Next Week:
Next week will be a pivotal week. We not only have earnings from mega-caps GOOGL, MSFT, AAPL, AMZN but we will get the PCE price index on Friday which is the FED’s preferred method of measuring inflation.
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Current Portfolio:
(Avg. Price, 1st Purchase Date, Stop Loss)
YELP 0.00%↑ ($36.45, 10/17/22, $35.00)
YELP continues to act very strong showing tight controlled action. While it formed a double bottom base, it added a handle and created an inverse head and shoulders pattern. Price pushed above the double bottom pivot and neckline with a nice increase in volume. After retesting that area Friday morning YELP bounced back to close near the highs of the day and week.
QQQ 0.00%↑ ($274.60, 10/21/22, $266.82)
QQQ closed back above the 21 ema along with the major indexes as a follow through day was triggered. This was bought to add exposure as there were no individual stocks that met my criteria for a buy.
Actions taken:
Bought: YELP, QQQ
Sold:
Potential Leaders:
AEHR, AMN, CCRN, CMG, DV, DY, FOUR, LPLA, PCTY, SRPT, SWAV, WWE, YELP
Additions: AEHR, CMG, DY, SRPT, SWAV, WWE
Removed: WSC
https://www.tradingview.com/watchlists/84325802/
Actionable Ideas:
Stocks listed in the actionable buys are stocks with strong fundamentals and showing good technical action that can offer a low-risk entry. Not every entry will trigger, but also just because a stock is listed here does trigger does not mean I will take the trade. Portfolio exposure, market health and other factors will also be considered.
AEHR 0.00%↑ – Failed Breakout Pullback - ~ $17.50
AEHR broke out from a cup base with strong volume. This is now a candidate for a failed breakout pullback to the 21 since it broke above the left side high of the base. Ideally this will come down on light volume, however with the strength this has been showing of late it is possible that it doesn’t trigger this entry.
CMG 0.00%↑ – Buyable Gap Up / Moving Average Volume Breakout - ~ $1620
CMG is forming a very nice cup base after a nice move up from the lows in July and August. Earnings are on Tuesday and one to watch for an earnings gap up that reclaims the 10 week and 50 day moving averages.
SRPT 0.00%↑ – Kicker / Mini Coil – Open > $112.87 or $117.99
SRPT is forming a very nice flat base with very tight weekly closes along the 10 week moving average. There are two possible entries set up for next week, the first a kicker pattern with a gap up open above Fridays open of $112.86. The second is a mini coil with a break above Wednesdays high of $117.99. This is a biotech though with no earnings, sales growth is strong however.
SWAV 0.00%↑ – Multitouch Trendline / Moving Average Volume Breakout - $284.41
SWAV continues to consolidate and has formed a very multitouch trendline. If this can take out the trendline and Tuesdays high of $284.41 with volume this could would get back above all key moving averages and the trendline that has served as resistance for weeks.
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The content presented is for informational and educational purposes only. Nothing contained in this newsletter should be construed as financial advice or a recommendation to buy or sell any security. Please do your own due diligence or contact a licensed financial advisor as participating in the financial markets involves risk.