The General Market
After a gap up, all the major indexes finished weak.
The QQQ formed an inside day andwas down .58% and the NASDAQ had more net new lows. We remain below the 50 SMA.
The SPY undercut yesterday’s lows and was down .76%. The NYSE also had more net new lows.
The IWM was down .61% and is right at its 50 SMA.
The VIX remains above all its moving averages. It did not make new short-term highs.
The T2106 is still short-term “oversold.”
Trends (3/4 Down)
Short-term: Down (still below the 5 SMA)
Intermediate-term: Down (below a declining 21 EMA)
Mid-term: Mixed (below 50 SMA but the 50 SMA is increasing)
Long-term: Down (below a declining 200 SMA)
Below are some stocks I’m watching to the upside that have been holding up well. Overall Biotech and Solar remain the strongest themes.
AXSM holding the 5 SMA.
TH continuing to build sideways.
CSIQ among other solar names holding up well.
ARRY continues to hold the 21 EMA.
ENPH holding the range. A break below Monday’s low would not be a good look. FSLR also strong!
SHLS – want this to tighten.
TMDX holding up well.
RYTM – tight action, could break either way.
KRTX acting well.
Another negative day as the indexes were rejected at their 50 SMAs. 4 days straight of weakness. Solar and Biotech continue to move sideways as the market pulls back.
The longer-term trends remain downward. Keep watching the leading stocks and the indexes. Be ready for anything!
How to Build and Manage a Portfolio (2022 Q3)
In this issue of Stock Guide, we’ll be focusing on how to build and manage a portfolio. We’ll go over how many positions you should own at once, how to size them properly and when to add to your best performers.
For our Q&A, we spoke with Kenny Polcari, Founder/CEO of Kace Capital Advisors and frequent financial media commentator. Kenny shared his thoughts about the current market, how investors should be managing their portfolios in different market cycles and much more. And finally, in this issue’s Good Trade / Bad Trade, MarketSmith Coach Sunny Phan gave us the rundown on two of his recent trades.
What is a Green Line Breakout?
This Friday, the market was down significantly, pulling back towards its 21 ema.
However, one stock really stuck out to me and the overall theme Friday suggests a potential short-term character change.
Before we go any further, make sure you are subscribed to Trading engineered so that you don’t miss any future educational posts such as my stock market outlook which will be up later today
Friday, OXY broke out of its handle in a nicely formed base above a rising 200-day moving average. It rose nearly 10% on 3X its daily average volume.
Oil and Gas / Energy names as a whole showed relative strength Friday although OXY was the standout. This breakout was somewhat news driven with Buffett announcing that they will look to acquire a 50% stake.
OXY has reported fantastic earnings and sales growth over the past few quarters. You also have fidelity increasing their stake.
Focusing on the setup, OXY formed an excellent 5% deep last contraction within an overall sound 26% deep base. This is exactly what I look for in terms of a VCP. The stock pulled back into the 21ema on well below-average volume.
On a 65-minute chart, you can see the last contraction in detail
Here is a 5minute chart of today’s breakout
Notice the strong action off the open, pullback on lighter volume, and then the push upward on higher volume through the trendline break on the higher timeframe.
Then the stock progressed somewhat before breaking out through an intraday trendline which is when the volume really started to flow in.
OXY ended up closing extremely strong, especially considering the QQQ and SPY were down over 1%.
If you missed it (like I did) Look for other stocks in the same theme that are set up for a potential move. For instance, EQT is one from my focus list.
Additionally. If OXY is going to become a huge leader, there will be multiple spots to get in. Maybe even Monday it forms an inside day with a nice intraday setup such as a range breakout. Or it could go sideways for a few days in a short-term flag before a breakout into new all-time highs.
Remember that there will always be another opportunity. On the long side, focus on the strongest stocks in the strongest groups with a proper setup and a logical place to manage risk. Some of the best entries occur when the sector is just starting to regain momentum.