Top One Percent Stocks – January 20th

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One of my favourite screens to run during rising markets is high relative strength. Every day, I go through the charts of strongest stocks and I look for three major setups:

  1. Breakouts – fresh breakouts from bases. Some of the breakout setups that I highlighted this weekend: RETA, AYX, TWLO.
  2. Anticipation setups – stocks in a tight range contraction that are setting up for a potential breakout. The results from this weekend: NVTA, ETSY, VCEL.
  3. Stocks that retake or bounce from their 10-day EMA.

Check out my latest book: Swing Trading with Options – How to trade big trends for big returns.

Momentum Monday – Back To Resistance

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$260 is proving to be a tough nut to crack for SPY, which has been basing below it for the past few trading days. This is not unexpected. 260 was a major support in late 2018. It’s normal to act as short-term resistance after SPY broke below it.

So what’s next: a new leg lower or a higher low and a break above $260, which can spur a fear-of-missing-out rally? Dip buyers have been very insistent lately and bad news has not been punished harshly by the market. This is typically a sign of positive market sentiment. Sentiment is what drives prices in a short-term perspective.

On today’s Momentum Monday, we discuss LULU, NKE, enterprise software stocks, the state open-source software companies, some biotech ideas and the connection between private and public markets.

Check out my latest book: Swing Trading with Options – How to trade big trends for big profits.

The Strongest Stocks In the Current Market

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I ran a screen for the strongest stocks currently in the market that belong to the strongest industries. They all have a relative strength rating of 99, which means they have outperformed 99% of all stocks and ETFs in the past year. An Industry rating of A means they also belong to the strongest 20% of all industries for the past six months. The screen produced 17 results: ATTU, AYX, CDNA, CROX, DXCM, EHTH, GOL, I, LFVN, MDB, NSTG, NVTA, SEND, TNDM, TTD, TWLO, VCYT.

Out of those 17, the ones that are in a tight-range contraction and therefore, most likely to break out and outperform in a near-term perspective are: ATTU and NVTA.

Check out my latest book: Swing Trading with Options – How to trade big trends for big returns.

Momentum Monday – The Bulls Are Raging. What’s Next?

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The oversold bounce continues with full force led by two groups of stocks:

  1. The ones the held the best during the correction – enterprise software names like TWLO, TEAM, MDB, AYX, SPLK, etc.
  2. The ones the were hit the hardest during the correction – small-cap biotech. (XBI).

My trading thesis is that all major U.S. stock indexes are now in new ranges. SPY is in 230 to 260. QQQ is between 145 and 160. IWM is between 125 and 145.

As they approach the upper levels of their potential new ranges, it makes sense to take profits if we bought the dip in the past couple of weeks and even think about initiating some small short positions if you are aggressive and skilled.

Check out my latest book: Swing Trading with Options – How to trade big trends for big profits.

Big Earnings Surprises

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Big surprises often lead to big moves. This is why one of my favorite screens to run on MarketSmith is for stocks that beat earnings estimates by more than 50% and receive favorable market reaction. Here’s my version of it:

The current list is quite short and involves stocks that have weathered the market correction quite well: SEND, TWLO, AYX, DATA, CHGG, TDS, USM, EHTH, REV, WK, FIVN, MTLS, SHEN, IONS, CROX, NXTM, APTI.

Check out my latest book: Swing Trading with Options – How to trade big trends for big returns.