Weekly Update: How To Survive 2022’s Bloody Start
It has been a bloody start to the 2022 market year with heavy declines across the board. The Russell 2000 fell into bear market territory this week, and the Nasdaq came within 1% of a bear market.
Some believe the low was made on Monday. Others insist we have further to fall. It is really impossible to say at this point. But in either case, volatility remains high. So, you must be precise to make low-risk trades with tight stops even in a healthy market.
Under the current conditions, stop losses are getting hit at a higher-than-usual rate due to the wild intraday swings. On Monday, the Dow fell over 1,100 points by lunch, then reversed all the way back to close positive on the day. This is not an ideal environment for risk-averse traders.
However, those playing the long game with plans of profiting in the markets for many years to come should welcome this correction and a potential bear market.
These selloffs come on occasion and are in fact necessary to remove the froth from the market, shake out the over-leveraged holders, bring down valuations and allow stocks to set up in fresh patterns.
And it is here where we find the new market leaders – names that can generate huge alpha with big returns in a short period of time.
The Impact…
Right now, very few stocks are setting up in buyable positions. Even big-name staples like Amazon (AMZN) and Google (GOOGL) are trading well below their 200-day moving averages – a key line in the sand for investors in search of strength.
Most of the names with good technical setups and tight pivot areas are small banks, which generally do not make large advances in price, and energy stocks, which carry a mountain of other risks related to the price of oil and natural gas.
The vast majority of stocks on my watchlist (usually 40-50 names at any given time) have been removed over the last few weeks.
Constructive pivot areas have broken down thanks to large drops in the prices of most publicly traded stocks.
These equities will need to set up again in a new pattern and form another tight pivot area at the edge of accumulation from which to buy in order to maintain a low-risk approach.
I’ve included three ideas with this week’s Watchlist. But, personally, I am not holding any positions right now.
I may attempt to buy one or two of these if they continue to set up constructively, but I will do so with very small size and only add to them if I see the trades working.
Continental Resources, Inc.
First up today is Continental Resources, Inc. (CLR).
Here’s how the chart is setting up:
And here’s how the stock is setting up with my Stealth System:
- Surge score: 99/100
- % Above 52-wk low: 181%
- Sales growth: +94%
- Triple momentum: yes
CLR, the $19 billion dollar oil and gas company, is forming a textbook “cup” base with a depth of 27%.
The stock also showed tremendous strength in an otherwise weak market by quickly recovering to make new highs on Wednesday.
I would prefer to see five to 10 days of tight trading on lower-than-average volume to form a small “handle” on the right side. This would create a buyable pivot area.
New York City REIT, Inc.
Next up on today’s list we have the real estate investment trust New York City REIT, Inc. (NYC).
NYC owns a portfolio of high-quality commercial real estate located within the five boroughs of New York City, particularly on the island of Manhattan.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my Stealth System:
- Surge score: 93/100
- % Above 52-wk low: 86%
- Sales growth: -7%
- Triple momentum: no
NYC does not meet all of our criteria for a typical breakout pattern. But NYC is something completely different – a “high tight flag.”
After advancing more than 100% in just one week of trading, the real estate investment trust has contained pullbacks to less than 20%, an impressive feat in any market but even more so now.
The rules for trading a high tight flag are simple – as long as it doesn’t breach the 20% retracement level (yellow box on chart, also known as the “flag”), the buy trigger is a move 10 cents above the high.
These are higher risk, higher reward trade setups.
Regeneron Pharmaceuticals, Inc.
Finally, we come to the American biotechnology company, Regeneron Pharmaceuticals, Inc. (REGN).
Here’s how the chart is setting up:
And here’s how the stock is setting up with my Stealth System:
- Surge score: 88/100
- % Above 52-wk low: 37%
- Sales growth: +51%
- Triple momentum: yes
REGN is a big stock capable of making big moves. When it first broke out in 2010, shares advanced by 1,848% over the next five years.
Compared with that meteoric run, REGN has essentially laid dormant ever since.
Above is a weekly chart to show the big picture. It is a pattern within a pattern – a “cup with handle” inside another “cup with handle.”
And despite big losses in most mega-cap names, REGN has kept retracements to a minimum and showed signs of what might be heavy support volume last week.
Look for a break of the latest handle and consider adding at new all-time highs. I will discuss this setup and how I plan to trade it in Monday’s live training session for members.
Live Coaching Session
Monday, at 3:00 p.m. EDT, we’ll be hosting our regular weekly coaching session for Stealth Trades.
We’ll send you a login reminder that morning, just so you don’t forget.
We’ll cover all of our new stocks on the Watchlist as well as the rest of the stocks inside Stealth Trades.
You need to attend this session to get the most from your subscription!
In the meantime, you can watch the replay of our latest Stealth Trades session right here.
Best wishes for your trading,
Ross Givens
Editor, Stealth Trades
