The indexes are flat-ish this week after this morning’s upmove, which marks a normal consolidation after the strong inflation report-induced rally last week. And, really, nothing has changed with the top-down evidence: The intermediate-term trend remains up, and the indexes are doing a good job shrugging off some hawkish Fed speakers of late (one this week said rates will eventually get over 5%) as well as the ongoing controversy/meltdown in all things FTX and crypto.
To be fair, the longer-term trend remains down and, to this point, the rally has been led by the Dow (not what you usually see at major turning points), but so far, so good, especially when combined with the prior few weeks of resilience.
Individual stocks, and especially anything growth-oriented or near its highs, remain hit or miss—in fact, we’d say there are more accidents (big gaps down on news) than shooting stars (those heading higher). That said, we’d also say we’re starting to see a few more proper setups out there, as well as some names that might not break out but aren’t budging, either.
That’s hardly conclusive, but the point is that (a) for now, the sell-on-strength action is still mostly ongoing, but (b) if the market can continue to improve, it’s also likely we’ll see more legitimate breakouts in the days/weeks ahead.
For now, then, we’re cautiously optimistic, but still favor going slow, using small positions and (if it fits your style) trading around positions here and there. Again, if the rally can hold together and gain some steam on the upside, we do think some of these strong names that have stagnated could break through—but we want to see it first to believe it. We’ll leave our Market Monitor at a level 5.
Natural gas seems to have stabilized in the $6 area, and Chesapeake Energy (CHK) has been cranking out a tightening base for three months now—it’s been rejected a few times near resistance (in the 102-104 area), but its dips after being rejected are also getting smaller. Long story short, we’re OK nibbling here with a relatively tight stop (94.5) and aim to buy more on a decisive breakout (105-106?) if it goes.
Dexcom (DXCM) has chopped sideways-to-down since earnings, but this comes on the heels of a move from 80 to 120 (round numbers) in October. Sure, it could fail, but with the 25-day line fast approaching (now nearing 110), we’re OK with a buy here if you’re not yet in, with a stop in the low 100s area.
We’re also seeing some potential pullback entries among the oils. On the explorer side of things, the sector remains choppy but names that recently hit new highs and then have dipped to moving averages could be worthwhile—Matador Resources (MTDR) is an example, with its latest dip to the 25-day line. And, for services, Schlumberger (SLB) continues to look attractive, with the latest dip approaching support near 50 (round number support).
Biogen (BIIB) looks great, though if you bought with us, you could consider ringing the register a bit here, selling a portion of your position, with a stop near 255 on the rest (which can hopefully run much higher).
It’s a similar story with Axon Enterprises (AXON), which gapped on earnings after our recommendation and continues to act well. Sell some, hold the rest.
No outright sells today, but we’ll take another look come Monday’s issue.
Academy Sports (ASO) near 41.5
Amylyx Pharma (AMLX) near 31
Arch Resources (ARCH) near 142.5
Biogen (BIIB) near 255
Calix Networks (CALX) near 62
Chesapeake Energy (CHK) near 94.5
Chord Energy (CHRD) near 144
Diamondback Energy (FANG) near 146
Regeneron (REGN) near 699