All charts on Momentum Monday are powered by MarketSmith
A strong bull market eventually lifts most stocks but not at the same time. There is a constant sector rotation which moves capital around. It seems the euphoria about the retail sector reached a short-term peak last week as many stocks in the sector have pulled back or consolidated through time since then. The bull market hasn’t even blinked. The money has rotated into enterprise software, semiconductors, and biotech.
All charts in this post are powered by MarketSmith
There are currently many eyes on ROKU. Some say that too much attention is never good for a stock and it often leads to failed breakouts. I say, sometimes great setups look like great setups and there is no reason to overthink and overcomplicate things. I am long ROKU for the following reasons:
1) It crushed earnings estimates two weeks ago: analysts expected a significant loss, ROKU reported a small profit. Big earnings surprises typically lead to big moves.
2) The market reacted positively to ROKU’s earnings report: it gapped up and it closed near the highs of its earnings day’s price range. The stock has consolidated in a tight range near its all-time highs ever since.
3) There are plenty of disbelievers in the stock and the company’s product. As a result, 13% of its float is short. Short interest is often a source of future demand, especially when short sellers are forced out of their positions when a stock keeps climbing higher.
4) We are in a bull market, which means that most stocks setting up for a breakout are likely to break out and many breakouts are likely to follow through.
A break over $60 might lead to a quick move to $65-70. A close below ROKU’s 10-day EMA (currently near 55) would invalidate my thesis.
All charts on Momentum Monday are powered by MarketSmith
The bull market in the U.S. is alive and well with retailers and consumer stocks leading the way. Apple keeps rising despite its enormous size. Nike and Lululemon broke to new all-time highs. Weed stocks have been on fire ever since Constellation Brands bought 40% of Canopy Growth. Dip buyers are starting to get active in Netflix, Nvidia, and Chinese stocks. Highly-shorted stocks like MTCH, DDD, and PETQ are squeezing higher. Overall, there are a lot more reasons to be bullish than bearish.