Stealth Trades Premium Content

Good evening, and welcome to this week’s edition of Stealth Trades!

As an active trader, I go to great lengths to keep the pulse of the market.

I track the major indexes for signs of accumulation and distributions. I track performance by sector and group to see where the money is flowing. I watch the top-performing stocks to stay abreast of market themes. I follow market breadth indicators like the number of net new highs.

I even chart the percentage of stocks above key moving averages and compare that to index trends in order to identify divergences beneath the surface.

It is a lot of work.

A lot of people have no interest in doing it. They want a simpler approach… one that can still deliver market-beating returns.

And for those folks, the answer is stage analysis.

Stage analysis, at least the way I use it, is based on the work of Richard Wyckoff. His books, published almost 90 years ago, are as relevant today as they were then.

Wyckoff laid out the 4 Stages of the Stock Cycle, and it is the backbone of my entire investment philosophy.

I teach this every Monday at 4pm ET in our Live Stealth Trades sessions. If you have not yet attended, I encourage you to do so. They’re free, and I have nothing to sell you.

All growth stocks go through 4 distinct stages. The length and severity of each will vary, but the playbook is the same.

I issued a new trade alert for Advance Auto Parts (AAP) on Friday morning for this very reason. Below is a weekly chart of that stock with the 4 Stages of the Stock Cycle overlaid.

Stage 1 is the Accumulation Stage. This is where institutional investors begin building positions in a stock they believe to be undervalued based on future expectations.

Stage 1 typically lasts between 6 and 24 months. During this time, the stock does nothing. It bounces around in a range near the lows of the last several years finding a bottom after a significant price decline.

You will often hear these stocks referred to as “value stocks” or “laggards.”

Stage 1 is like watching paint dry. Nothing exciting happens here. But when the stock eventually emerges from this consolidation area and breaks the Stage 1 high, things start to get interesting.

Stage 2 is known as the Markup Stage, and this is where 90% of your gains as an investor will come from.

When a stock emerges from its Stage 1 base, it usually means something exciting is happening with the company. Maybe it has a hot new product or service. Maybe sales and earnings are growing at a high rate. Maybe the company hired a new CEO who is turning the company around (this was the case for Advance Auto Parts). Or maybe the stock is simply in the right place at the right time (AI, crypto, semiconductors, etc.).

Whatever the reason, the stock is now in demand. It has gone from a dud to a stud, and institutions are actively buying it up.

When large institutional investors like Warren Buffett buy a stock, it takes some time. There is not enough liquidity for them to buy it all at once. It typically takes several months to build up a full position.

For this reason, stocks tend to trend well in Stage 2. The constant buying pressure guides the stock higher. Every dip is bought, and the stock typically finds support along its 50-day moving average.

Below is a weekly chart of Mohawk Industries (MHK) during its Stage 2 rally in 2017:

Note how the stock is trending almost perfectly along its 50-day moving average (red line).

But eventually, the party comes to an end. Institutions have to sell to collect their profits. This might happen when the stock has reached what they believe to be fair value. Or the company could begin showing weakness and posting earnings below expectations.

Whatever the reason, the big guys sell with far less grace than they buy. When they want out, they dump it – quickly.

This triggers Stage 3 –Distribution.

Stage 3 is where I see most retail traders get in trouble. They watched the stock soar several hundred percent, all the while scared to buy at the top. Then finally… a pullback!

The stock drops 30% in a few weeks and they jump in.

But this is a mistake. With the large institutional investors no longer buying, the stock has lost its support. The move is over. This is the beginning of the end, not a buying opportunity.

The easiest way to spot Stage 3 is by watching the volume on the dip.

Look at the weekly chart of Crocs (CROX) below:

After climbing over 300% in Stage 2, the stock fell 31% in a week. That should be enough to tell you the party is over. But note the volume at the bottom of the chart…

This decline came on huge volume – the highest since the stock began trading. And if that wasn’t enough, CROX fell another 19% the following week, again on record volume.

The market is telling you very clearly that the easy money stage is over. Wall Street is dumping the stock, and it will fall further in Stage 4.

Stage 4 is the Markdown Stage. Any remaining institutional investors will dump the stock. Retail traders will foolishly buy the dips and suffer large losses as the stock continues to decline.

Most Stage 4 declines see stocks fall 50-80%. In CROX’s case, the stock fell 98% to a low of 79 cents.

If you are a short seller, this is your window. If not, stay away from stocks in Stage 4. You have everything going against you.

Wait for the stock to bottom, put in a new Stage 1, and emerge into another Stage 2 rally.

These are the 4 Stages of the Stock Cycle. And every major growth stock goes through them, over and over and over again throughout the life of the stock.

Some Stage 2 rallies may only last 6 months. Others several years. As I said earlier, the severity of each stage will differ from stock to stock and year to year. But the cycle remains the same.

Buying stocks at the beginning of a new Stage 2 rally is, in my opinion, the gold standard for longer-term investors. Watch a weekly chart and with a 30 or 40-week simple moving average (150 or 200-day). Wait until the stock is at least 30% above its 52-week low (some will be 100% or more) and breaking above the highs of its Stage 1 base.

Ideally, you want to see the stock breaking out on above-average volume. This is a look at the daily chart of Advance Auto Parts (AAP) – the one we recommended buying this morning – currently breaking out of Stage 1.

Note the significant increase in volume (white arrow) as AAP surges through the $75 level. This was the high of Stage 1.

As far as when to sell, there are a few schools of thought.

Shorter-term swing traders like me look for a multiple of risk. So, if I risk 20% on the trade, I want to make at least 40%.

Trend traders who want to catch the bulk of the move can use a simpler exit like a weekly close below the 75-day moving average. You won’t get out at the highs, but you will catch the bulk of the move whether that be 50% or 500%.

Regardless of your approach, early Stage 2 breakouts are, in my opinion, the best place to buy stocks.

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

The market is beginning to feel “toppy.”

Stocks have pushed higher since November in one of the strongest rallies we have witnessed in years.

Four months of higher highs and higher lows without so much as a 3% dip. It is almost unheard of.

I have been passionately bullish since the October lows. But even I did not expect a move this pretty.

During this period, several stocks have made parabolic moves.

Nvidia, the mega-cap semiconductor stock and clear market leader, more than doubled in two months. It came out of a textbook base pattern and quickly rocketed to nearly $1,000/share.

This stock added a TRILLION dollars to its value in 60 days.

Super Micro Computer did even better…

SMCI shares surged from $300 to $1200 in 50 days.

It QUADRUPLED in 7 weeks!

Eventually, both of these stocks will crash. The AI hype will wear off, sales and earnings will slow down, and investors will see a decline of 50-80% in these holdings.

But when?

While I do not think the bull market is over (in fact, far from it), I do think we could be seeing a short-term top.

Every bull market has a theme. And within that theme you will find the market leaders.

The leaders of this rally are obvious: Nvidia (NVDA), Super Micro (SMCI), Meta Platforms (META), Microsoft (MSFT), Palantir (PLTR), and maybe a few others.

These are the stocks you want to keep an eye on. When they begin to fail, the rest of the market is usually not far behind.

Today, NVDA showed clear weakness. After gapping up to new all-time highs in the morning, the stock sold off, falling 10% intraday on heavy volume.

This is something known as a “downside reversal.” A stock makes a new high, then reverses to close down on the day. When you see this, especially on above-average volume, it could be a sign that the top is in.

As of the time of this writing – 1 hour before the Friday closing bell – the Nasdaq and S&P 500 indexes are also showing a downside reversal pattern. So is AMD, META, and SMCI.

Another data point beginning to worry me is the narrow market breadth.

Breadth refers to market participation. When the indexes are rallying, we want to see the majority of stocks rallying along with it.

Right now, that is not the case.

The chart below shows the S&P 500 index on top and the percentage of stocks above their respective 50-day moving average beneath.

The divergence is hard to miss.

While the index has gained nearly 10% this year, participation has fallen from 85% to 55%. In other words, almost half the stocks on the major exchanges are in short-term downtrends.

How is this possible?

The indexes are market-cap weighted. Larger stocks like Microsoft, Nvidia and Amazon have significantly more impact than smaller names.

In fact, a whopping 55% of the S&P 500’s 2024 return comes from just four stocks – NVDA, META, MSFT and AMZN.

This trend could reverse. It is possible we see a rotation out of mega-cap tech names and into a broader group of stocks.

But if institutions sell what have been this year’s high-flying stocks, it will likely trigger a short-term correction in the market.

I want to be clear – I am NOT saying the bull market is over. But a lot of stocks feel extended right now.

This move needs to be digested. Weak hands need to be flushed out. Traders who are over-leveraged and chasing parabolic moves need to be stopped out.

Every so often, the market must knock the froth off. Otherwise, it sets itself up for a major correction like the 1999 Tech Bubble.

This afternoon, I put on a hedge. I sold short QQQ – an exchange traded fund representing the Nasdaq – at around 440. My stop loss is just above the high of the day at 449.

This represents a 2% risk.

I hope the trade does not work out. I am happy to take a small 2% loss if stocks continue higher.

Another way to hedge one’s portfolio is with a put option.

The QQQ Apr19 $435 put trades for about $7 ($700/contract). Each contract represents 100 shares of stock. So, for $700 you could hedge a $43k stock portfolio for the next 6 weeks.

That comes out to an “insurance” cost of roughly 1.5%.

And while I would not recommend maintaining an option hedge year-round since it would eat up a lot of your gains, it seems prudent here after such a profitable 4 months.

Best wishes for your trading,

Weekly Update: How to Spot A “Power Trend”

Good evening, and welcome to this week’s edition of Stealth Trades!

Good evening, and welcome to this week’s edition of Traders War Room!

Here’s what most people don’t realize about the stock market…

It is only good about 30% of the time.

What do I mean by “good”?

I’m referring to a healthy, trending, bull market environment where the odds are stacked in our favor.

You see, the market only trends about 30% of the time. The other 70% of the time, stocks are moving down or sideways.

This is the S&P 500 index over the last two years (104 weeks):

The yellow boxes highlight periods of sustained uptrends. Out of 104 weeks, only 27 of them meet my criteria.

So, it is crucial to take advantage of these windows of opportunity.

The last few months have been phenomenal for us and our members.

In our Alpha Stocks service, we have caught huge moves from market leading stocks like Dream Finders Homes (+65%), Alpine Immune (+71%), Black Diamond Therapeutics (+64%), Eagle Materials (+48%), Bit Digital (+51%), Mohawk Industries (+38%), Interactive Brokers (+31%), and countless others.

In our FIRE Trader service which uses a precise pattern to identify low-risk entries into high-flying stocks we have bought stocks like SRRK which went up 82% in 43 days, ABSI that soared 113% in 14 days, and VKTX which is up 302% from where we bought it 7 weeks ago.

Heck, the last two stocks we recommended in the Insider Effect are up 44% (RLMD) and 65% (SANA) in less than a month!

Gains like this can only be achieved in a strong, trending market environment.

The strategies are sound. Our entry and exit tactics are proven. But the real magic comes when they are applied at the right time.

2022 was tough. It was a bear market. We had some good trades, we made a little money, but nothing like what we are seeing right now.

That’s just part of the game.

You must be willing to weather the storm when conditions are poor if you are going to have real success. Because make no mistake – another bear market will come.

These conditions will not last forever.

There will be times when the markets pull back or trade sideways for weeks or even months.

But when conditions are good, that’s when you want to step on the gas… to get full exposure and make big profits during these lucrative periods.

So, how do you know when conditions are “good”?

Allow me to introduce… THE POWER TREND.

The Power Trend is a concept developed by Mike Webster and Charles Harris during their time at Investors Business Daily, and it can be applied to any major index like the S&P 500.

Here are the rules that trigger a Power Trend:

1. The low is above the 21-day EMA for at least 10 days
2. 21-day EMA is above 50-day SMA for at least 5 days
3. 50-day SMA is in an uptrend
4. Index closes up for the day

Here is a look at what started the one we are in right now…

And this is where we are today…

Power Trends present some of the best money-making opportunities for traders. Even long-term investors, if they go back and look, will find that the vast majority of their gains come during these periods.

So when will the rally end?

I don’t know. But this is what signal the Power Trend is over:

1. 21-day EMA crosses under 50-day SMA or
2. Close 10% below recent high and below 50-day SMA

When one of those two things happens, I take my foot off the gas and cut down exposure or go completely to cash.

Until then… enjoy the ride.

Best wishes for your trading,

Ross Givens, Editor

As of 11:30 AM ET on Friday, the S&P 500 is up about 1.7% for the week while the Nasdaq is up by 1.2%. Yesterday, they closed at new record highs.

The pullback I think is overdue doesn’t look like it’s going to happen within the next few days (although the market has a tendency to surprise you).

One big reason for that is undoubtedly Nvidia, whose fourth-quarter earnings release late Wednesday blew the already high expectations out of the water – sending its stock surging by 16% in a single day (and the stock gapped up today as well).

Nvidia’s blockbuster earnings lifted the sentiment of the entire market, delaying a pullback that had only just begun.

But make no mistake, I still firmly believe the market will enter a real pullback soon.

The divergence between market performance and market breadth I’ve been highlighting is still there.

Only 51% of stocks above their 50-day moving average, and only 59% of stocks are above their 200-day moving average. Those figures have fallen significantly since late December – and yet the major indexes are at new record highs.

For the rally to be sustainable, we’ll need to see much stronger participation than this.

The question is – when the pullback comes, how long and how painful will it be? That is something no one can predict (and if they tell you they can, they’re lying).

Same thing with when the pullback will actually hit – no one can tell. 

But as famed trader Walter Deemer says, the most bullish thing the market can do is keep going up. And that may very well happen.

That’s why the theme of this update is Striking the Balance. What’s the balance between expecting a pullback – and participating in a rally that just won’t quit?

Before I answer that, let me get clear that I firmly believe that the coming pullback  will be a healthy one (even if it probably won’t seem so when you’re in it).

Let’s quickly go over the reasons why.

First, the market mood is still very much “risk on”. And to gauge that, we can look at the performance of Bitcoin, one of the most speculative asset classes there is.

Second is the AI factor. Nvidia has shown that it’s much more than just hype – but something that’s being backed up by actual dollars. And we’re still in the early days.

Third is the coming Fed rate cuts. Yes, it’s true that many traders have overestimated how quickly these rate cuts are likely to occur – especially in light of the latest inflation data (in fact, this overestimation is one of the reasons the market will likely pull back soon).

And fourth is the fact that there is still over $6 trillion parked in money market funds – money sitting on the sidelines that can easily fuel the next big leg up.

So, coming back to the question of striking the balance between expecting a pullback and participating in the rally…

The important thing to remember here is that individual stocks – and even individual sectors – are not the market. The market is just a composite of them all.

Navigating this balance means going beyond the surface and searching for specific areas of strength – regardless of what the broader market is doing.

These areas of strength are where you’ll find the market leaders – the stocks that are likely to break out ahead of the market.

As for where to find these areas of strength, well, that’s one of the reasons I built our Industry Strength Gauge.

As you can see, crypto and digital payment companies are still leading the pack.

So that’s where I’ll be focusing a lot of my research in the coming weeks. I’ll be scanning for my trusted setups – looking for signs of institutional buying that signal high-percentage breakouts.

I’ll keep you informed. Have a good weekend ahead.

Best wishes for your trading,

Ross Givens

Good evening, and welcome to this week’s edition of Stealth Trades!

In last week’s email, we talked about buying stocks on pullbacks. I outlined two methods of buying stocks on temporary weakness from low risk buy points.

If you missed it, check your inbox for a January 26 email titled “Weekly Update: How to Buy Stocks on Pullbacks.”

Today I want to add to that discussion by adding another element to the equation – volume.

Volume is one of the most overlooked indicators for traders. Learn to interpret it, and you can decipher what is really happening beneath the surface.

Remember that institutions are what moves prices. Multi-billion-dollar hedge funds, mutual funds, ETFs, pension funds and other large players are the ones whose buying and selling actions push stocks up and down.

So, when a stock is rallying on above-average volume, it usually means big players are behind the rally. And they don’t buy for a day or two. It usually takes them weeks or months to build their positions.

The same is true on the downside…

Let’s say a stock fell 10% last week. If this took place on huge volume, the big boys are getting out and you should probably do the same. If the same 10% decline occurred on BELOW average volume, however, this is likely retail selling or normal fund rebalancing.

All things being equal, a stock pulling back on the lightest volume is the one you want to buy.

Take a look at this chart…

This is CrowdStrike Holdings (CRWD) stock from October through today. I have marked up the pullbacks and consolidation periods.

At Point 1, the stock pulled back 11% over a two-week period. But look at the volume graph below where I have drawn an arrow…

Notice how the decline took place on below-average volume. If you are looking for a place to buy or add on to an existing position, this is the place to do it – right between the 21 and 50-day moving averages after a low volume retracement.

The stock quickly rebounded and climbed 20% over the next two weeks.

Point 2 is more of a consolidation than a pullback. This is an area where price action compresses, the range becomes tight, and again we see volume well below its average level.

Profit taking is minimal. No one is selling and the stock is becoming harder to buy. Once CRWD broke out, it quickly rallied another 22%.

Point 3 is similar to the pullback at Point 1 – a shallow 8% decline over 2-3 weeks on very minimal volume. The stock dipped to the 21-day EMA, found buyers, then tacked on another 26% move to the upside.

That brings us to today…

Here, at Point 4, we see very similar action to what we saw at Point 2 back in November – tightening price action, a narrow range, and volume drying up.

And while nothing is guaranteed, this stock looks poised for another leg higher.

Volume is a crucial component of my stock analysis. If the price chart looks good but the volume graph doesn’t confirm, I have learned it is best not to take the trade.

I analyze breakout trades the same way. Here is a chart of Airbnb (ABNB) stock over the last six months:

We can see the shallowing action as the stock tightens up from left to right. This is textbook pre-breakout action. And volume confirms the story…

The initial rally into Point 1 took place on high volume. The pullbacks at Points 2 and 3 occurred on lighter action. Then volume picked up at Point 4 as the stock formed a bottom – a sign that buyers are stepping in and supporting the stock.

This was followed by a low-volume consolidation (Point 5), a high-volume rally (Point 6), and so on.

Volume can also signal the start of new trends.

In fact, we may have just seen one such occurrence today in Meta Platforms (META).

The social media giant announced better-than-expected earnings and revenue, along with its first-ever dividend and a $50 billion stock buyback program. Shares surged 20% on the news.

The last time this happened?

One year ago to the day… and it triggered a 150% move.

A 20% post-earnings move on the highest daily trading volume in a year… looks kind of familiar, huh?

Trading does not need to be overly complicated. I’ve known traders with so many indicators on their charts you couldn’t even tell what the price was.

Keep things simple – price, volume, and a couple of moving averages to serve as guideposts. There’s no magic indicator. But volume is probably the closest thing to it.

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

The bull market rages on. The Dow, Nasdaq and S&P 500 indexes made new all-time highs for the second week in a row.

We have been preparing members for this move for months. If you followed our advice, you are fully invested and enjoying the fruits of your diligence.

But if you still have cash waiting to be deployed, the best way to do so is to buy on pullbacks. And in this week’s newsletter, I want to give you a crash course on how to do that.

Pullback buying is different from buying a breakout. What you want to find is a key level that is likely to support prices where buyers are prone to step in.

When the S&P 500 set up in a breakout pattern last year, it was actually less risky to buy a new high since this meant the consolidation was over (see chart below).

But today stocks are making new highs. So, you’ll want to take a different approach.

There are two places to buy pullbacks – moving averages and support levels. Let’s start with moving averages since this is the simplest method.

Stocks that trend well, especially large cap stocks, tend to find support at one of their key moving averages on the way up.

The two I watch are the 21-day exponential and 50-day simple moving average.

For very strong stocks – those rising 15-20% per month – I like to buy on pullbacks to the 21-day. Below is a daily chart of Zscaler (ZS), a leading cloud-based cybersecurity stock.

Notice how the 21-day EMA (blue line on chart) “supports” the stock price on the way up. Any touch of this line is typically a good place to buy during a strong trend.

We saw the same thing with CrowdStrike (CRWD) – another leading software stock.

For slower-moving stocks – those going up 5-10% per month – I like to watch for pullbacks to the 50-day moving average.

This is a heavily defended level in Stage 2 uptrends where we typically see institutional buying.

This is Microsoft (MSFT) during the powerful run it made in the 2^nd quarter last year:

Notice how support is found at the 50-day moving average (red line) each time it is hit.

We can see the same thing in the current rally taking place in Microsoft (MSFT) today:

For large, blue-chip stocks, the 50-day moving average is by far my favorite place to buy during trends. If a stock cannot hold its 50-day, it is likely in trouble and not experiencing the kind of institutional buying that leads to large moves.

So that’s the quick and easy way. Look for leading stocks in strong trends and buy on pullbacks to the 21 or 50-day moving average depending on how rapidly the price is rising.

If you are unsure which to use, just split the difference and try to buy between the two. You don’t need to risk more than about 15%. When bought at proper support, the stock should reverse soon and resume its uptrend.

The other place to buy pullbacks is at previous support and resistance zones. This works on both individual stocks and indexes.

Below is a weekly chart of the S&P 500 index:

Notice the initial breakout in April of last year that we discussed earlier. This was a resistance level the market could not get above.

The rally that followed handed us big gains before running out steam and pulling back. Where it stopped, however, was not a coincidence.

What was resistance often becomes support, and this became a powerful support level where investors could buy the pullback. You may remember this setup when I pointed it out in October – the week before this huge rally began.

You will find this same approach useful for individual stocks. Let’s take Salesforce (CRM) for example…

Here you can see a clean breakout entry from May of last year at the $200 level.

Now look what has happened since:

This $200 resistance level then served as support and created three great buying opportunities before the next rally higher.

Previous highs or lows can also serve as future pullback buy areas. In the daily chart of Microsoft (MSFT) below, we see the all-time high it made back in July.

Six months later, after the stock had surpassed this level, it became a new area of support and a great place to buy on a pullback.

This time, it coincided with the 21 and 50-day moving averages.

Three levels of support at the same price on a market-leading stock during a bull market? That’s a buy signal all day long.

These simple techniques will help you buy pullbacks at areas with the least amount of risk and the greatest chance of a quick bounce higher.

There are other things to watch for to make this approach even more effective…

One trick is to buy low volume pullbacks after high-volume moves higher. This is another clue that selling is light and institutions are still in control.

But we can dive into that another day.

Best wishes for your trading,

The markets are stalling at the highs.

Stocks advanced this week, erasing last week’s losses and sending the major indexes back to all-time highs.

This is about what we were expecting. Markets have now been range bound for four weeks which, as I have discussed previously, is healthy price action.

The November/December rally was one of the strongest on record. A move like that must be absorbed to flush out the sellers, allow for natural profit-taking, and set up the next advance higher.

The S&P 500 and Nasdaq indexes are both sitting at their all-time highs from late 2021 – a natural place where we would expect to see a pause.

The Russell 2000 small cap index shown below has the most ground to make up before reaching new high ground.

I still expect small caps to outperform in 2024, and I have allocated my retirement accounts accordingly.

The homebuilding sector along with biotechs continue to show the most relative strength. But another group is again marching to the top of the pack…

Back in November, we highlighted the nuclear and uranium sector as a standout in terms of performance.

Based on this, we bought Cameco (CCJ) and enCore Energy (EU) – two leading nuclear stocks that were breaking out from consolidation patterns.

Both delivered stellar returns.

The sector pulled back in December, but we are again seeing these stocks advance higher. Both of the names I just mentioned made new highs on Friday.

I keep a Nuclear/Uranium stock watchlist in TradingView. There are 24 names on it.

If you want to create your own watchlist for this sector, here are the ticker symbols: CCJ, UUUU, DNN, LEU, UEC, URG, BOE, PDN, BMN, UROY, NXE, SMR, BHP, CVV, AMLI, LTBR, CEG, NRG, FCU, UCLE, MGA, ISO, BWXT, and BKY.

Most of these are US stocks, but a few trade on foreign exchanges. They also range from small to large in terms of market capitalization.

I did a quick scan of the charts and here are my favorites right now:

Denison Mines (DNN)

Dennison broke through its downtrend line with conviction on Friday. Shares finished up 10% on the day, closed at the high of the daily candle, and made a new 52-week high on the highest volume in over a year.

This is a clear sign of institutional buying.

The stock also pulled back quietly in December, giving up minimal ground and showing no signs of heavy liquidation.

Ur Energy (URG)

URG also broke out on record volume Friday.

After a beautiful uptrend from July through September that saw shares advance 77% in as many days, the stock has been consolidating for the last three months.

Friday’s move to new highs could be the ignition URG has been needing to resume its rally.

NRG Energy (NRG)

With a market cap of $11.4 billion, NRG is one of the larger stocks in the group. Because of that, it is much less volatile and has shown to trend more steadily.

As of today’s close, the stock is sitting on its 21-day moving average. This has been a support level for NRG throughout this move, making this an ideal buy point on the pullback.

IsoEnergy (ISO)

ISO is a small-cap uranium mining company based in Saskatoon, Canada.

Like some of the other names in this group, the stock has been consolidating for the last few months. Friday’s high-volume move broke through the pivot level, signaling that the market has finally worked through supply.

If this uptrend in uranium stocks continues as expected, ISO could see a substantial move higher in a short amount of time.

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

The market pulled back in the first trading week of the year.

That is a good thing.

We all love when stocks go up. But if they go straight up for too long, it is only a matter of time before prices correct harshly.

Stocks went up in 8 of the last 9 weeks. That is almost unheard of. The market needs time to digest this rally, absorb the sellers, and set up for the next move higher.

The best gains come from clean breakouts out of shallowing compression patterns. This is my go-to chart pattern when looking for institutional buying.

Here was the Russell 2000 index breaking out in December:

This led to huge gains for those who were holding the right stocks in the right sectors.

The process for finding high returns is simple:

• 1. Strong market
• 2. Strong group
• 3. Strong stock

At the start of December, crypto and home construction were the strongest areas of the market. The ETFs representing these groups (BLOK for crypto and ITB for home builders) were up more than their peers.

So this is where we focused our efforts.

That’s how we knew to buy Mohawk Industries (MHK) – a residential flooring company that was breaking out around the same time:

We bought Dream Finders Homes (DFH), a residential home builder, at the same time:

In the crypto sector, we bought Bit Digital (BTBT):

…and Marathon Holdings (MARA):

My process does not change. When the market gives a buy signal, we get aggressive. The top stocks in the top groups are your best bets.

When the market is weak or extended, we trade smaller – still focusing on leading stocks in the top-performing groups.

Below is a summary of the top 5 performing groups over the last 1, 2 and 3 months:

Home builders, biotech and banking are currently leading the way with shipping beginning to emerge as a strong performer.

Star Bulk Carriers (SBLK), for example, is beginning to look strong on a weekly chart:

If shipping stocks are being accumulated by institutions, we will see this group continue to outperform and find similar setups in multiple stocks in the sector.

Many groups, like banking for example, are currently extended. We need to see prices consolidate and tighten up before they are ripe for new buys.

We are only one week into 2024. If the bull market we see shaping up plays out as expected, there will be plenty of opportunities to profit this year.

Stay patient. Focus on strength. And demand picture perfect setups before pulling the trigger.

Best wishes for your trading,

Good evening, and welcome to this week’s edition of Stealth Trades!

The bull market marches on.

Investors are having a very Merry Christmas. Stocks delivered another positive week with only the shortened post-Christmas trading week remaining in 2023.

As I have been pointing in the last few weekly updates, the Russell 2000 index continues to lead the market. It tacked on another 2.44% this week for a total gain of 12.93% over the last month – more than double the performance of the S&P and Nasdaq.

But the real story this week was the Wednesday afternoon selloff.

In the final two hours of the trading day, stocks sold off hard. The Nasdaq index lost 1.7% of its value in 120 minutes.

Some investors panicked. After all, the indexes have not had even a 1% down day in two months. We, on the other hand, did nothing.

And stocks quickly returned to their highs by Friday afternoon.

It is easy to be confident in a bull market when the internal metrics are so strong.

Unlike the rally in the first half of 2023 which was led by only a tiny handful of mega-cap stocks, this one has broad participation. The Russell 2000 small cap index outperforming larger names like Apple, Amazon and Google – traditional “safe haven” stocks where institutions sat for most of the year – is proof of that.

As of this afternoon, a whopping 83% of stocks are above their 50-day moving average. This is a key support level for up trending stocks.

And 80% of stocks are above their 20-day moving average. In other words, 4 out of 5 stocks are in strong up trends.

The chart below shows the percentage of stocks above their 20, 50, and 200-day moving averages respectively.

This is what a healthy bull market looks like. And this is why I want to buy on pullbacks, not sell.

The Wednesday afternoon selloff caused a 90% down volume day. This is when more than 90% of the trading volume occurs on declining stocks. We saw several of these during the 2022 bear market. But Wednesday was the first one we have seen since March.

But markets responded immediately by putting in a 90% UP volume day on Thursday. This is a clear sign that investors are buying into these dips.

Historically, strong performance leads to more strong performance. Newton’s first law: an object in motion tends to stay in motion. And stocks are absolutely moving.

Over the last 36 trading days, the S&P 500 index is up over 16%.

This is one of the biggest short-term rallies in decades. Performance like this is in the 99^th percentile historically.

And I would be shocked if the market weakened any time soon.

The areas we have been focusing on the last few months continue to be the best performers. Bitcoin and other cryptocurrencies are on a tear. We bought crypto mining stock Bit Digital (BTBT) three and a half weeks ago. It is already up 52%.

Homebuilders and building materials stocks also continue to outperform. I believe this will be a leading sector in 2024 and am patiently waiting for a pullback to buy more stocks in this group.

But for the next few days, forget about stocks. Forget about trading and profits and institutional consolidation patterns.

Spend time with your family and make this Christmas one they won’t forget.

Merry Christmas.

Best wishes for your trading,