Momentum Monday – The Big Squeeze

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Momentum stocks were on absolute fire last week and accelerated their ascent – software (FSLY, APPS,VRNS, MDB, WDAY,IGV, etc.), cybersecurity (HACK), anything cleantech (especially solar TAN and fuel cells like PLUG, BE, BLDP, FCEL), social distancing (PTON), e-commerce (CHWY, RVLV, ETSY, SHOP), e-sports and games (SKLZ, NGMS, PENN, CRSR, DKNG), online payments (SQ, PYPL, PAGS, STNE, ADYEY), real estate software (RDFN, Z, FTHM, EXPI, IPOB), select biotechs (TGTX, SGTX, BTAI, IONS, SAGE, RARE, ITCI), homebuilders (NAIL). Gold and silver also started to move as it became clear there is an agreement for a new stimulus. Bitcoin broke above 20k. Even some of the mega-cap like AMZN, AAPL, and MSFT woke up. The U.S. Dollar made new multi-year lows.

Many momentum stocks are looking extended for new entries here. I wouldn’t advise chasing stocks that are up multiple days in a row and 20-50% in the past 1-2 weeks. We certainly noticed an uptick in volatility last week – there were quite a few failed breakouts and reversals which means many people are anxious to take profits quickly. Capital is not leaving the market. It is just rotating very rapidly. There is still a good number of decent long setups and they might just continue to work into the end of the year. Until all major indexes’ 5-day EMAs are above their 20-day EMAs, we should be focused on long setups.

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