Last week brought us an exercise in patience. You wouldn’t necessarily realize it if you were predominantly on the sidelines or mostly watching the indexes, but many of the high growth, high momentum names we typically trade had some wild swings. A few examples from my own portfolio are INMD, VRT, and HEAR. Intraday last week, these trades were all over the map.
This kind of price action in stocks lends to notion that ‘there’s a lot of froth’ in the market. That things are a little ‘too good’ and we’re kind of just waiting for the inevitable shoe to drop.
This may be true, but at the same time it also creates the proverbial ‘wall of worry’ as the indexes continue to march higher. Each of the major indexes hit fresh all time highs last week and each are in uptrends on all time frames (with the exception of the Russell and the Dow which I’d argue are in short term sideways trends on the daily timeframes).
Something else that’s notable is the number of stocks hitting fresh highs. The NASDAQ was in the high 300s Monday, Tuesday, and Wednesday of last week. That’s the most amount of new highs we’ve seen since 2016, just before the market went on an epic 2 year run. I’m not saying we’ve got another 2 years of an epic bull run (maybe we do, maybe we don’t) but I do think it shows an expansion in breadth and participation in this rally and that is pretty bullish.
During the deep dive, I also highlighted that after the 2016 peak in new highs, the number of daily new highs quickly settled back down and staying in the 100-200 range. A sudden drop in the number of new highs doesn’t by itself imply the rally is done. It could go on for much longer.
Given that most positions are still acting well (see open trades), I’m planning to add ALGN, GOOGL, and TSLA to the mix should they breakout. All have strong setups and have high Trade Gauntlet scores. Should this change, I’ll alert you in the Trader’s Mindchat Room and send an email update.
Checkout the charts of the indexes below for a closer look at the action.
MONTHLY CHARTS (indexes) Overcall Direction = Up: https://www.tradingview.com/x/qYCSsyp9/?aff_id=15325&offer_id=10
WEEKLY CHARTS (indexes) Overcall Direction = Up: https://www.tradingview.com/x/l8gzT7vp/?aff_id=15325&offer_id=10
DAILY CHARTS (indexes) Overcall Direction = Up: https://www.tradingview.com/x/5pTvayfc/?aff_id=15325&offer_id=10
(on the lower right is the image of stocks hitting new highs vs new lows on the NASDAQ & NYSE)
Deep Dive Video