Weekly Update: Searching for Pockets of Strength
Following a solid, two-week rebound rally for the market, the major indexes cooled off a bit this week.
I’ve told you in recent weeks that I was beginning to increase my exposure to stocks again, but I am being selective about it.
Here’s why…
The S&P 500 is back above both its 50-day and 200-day moving averages (MAs), which is a good sign.
The 50-day has also started to flatten out and should turn higher in the coming days.
However, the Nasdaq 100 and the Russell 2000 are still sandwiched between their 50-day and 200-day MAs, so the technical picture isn’t completely bullish by any means.
And even though the S&P is above its major MAs, only about 50% of stocks in the index are trading above their own 200-day MAs.
I’d like to see a bit more participation before increasing my exposure further.
Still, there are numerous pockets of the market showing strength.
In recent Weekly Updates, I’ve highlighted energy, steel, basic materials and shipping groups as well as agricultural stocks that got a boost from the ongoing Russia-Ukraine conflict.
These groups continue to thrive in a market that is largely in neutral territory, so this week we are going to stick with what’s working…
Alliance Resource Partners, L.P.
Alliance Resource Partners, L.P. (ARLP) is a $2 billion natural resource company focused on producing and providing coal to utility and industrial companies.
Here’s how the stock chart is setting up…
And here’s how the stock is setting up with my Stealth System…
- Surge score: 98/100
- % Above 52-wk low: 188%
- Sales growth: +29%
- Return on Equity: 16%
- Triple momentum: yes
Coal stocks are booming, and ARLP has the best setup of the bunch.
While price has drifted higher, pullbacks have shallowed from 25% down to 8%.
And the shares have been trading in a tight range in the $15-$16 area for the last two weeks.
Look for a breakout above $16 to buy. Then, place a stop at $14.60 for protection.
Danaos Corporation
Danaos Corporation (DAC) is a $2.2 billion, Greece-based marine shipping and transport company with a fleet of over 70 containerships.
Here’s how the stock chart is setting up…
And here’s how the stock is setting up with my Stealth System…
- Surge score: 97/100
- % Above 52-wk low: 129%
- Sales growth: +80%
- Return on Equity: 23%
- Triple momentum: yes
I added Danaos to the Watchlist a few weeks ago, and I still like how it’s setting up.
I noted then that it had just completed a seven-month “cup and handle” pattern.
But DAC has now formed another smaller cup formation with a low-risk entry point.
Consider buying on a move above $107.50 with a stop near the $99.00 level.
Yamana Gold Inc.
Yamana Gold Inc. (AUY) is a $5.5 billion Canadian precious metals exploration and production company focused primarily on gold and silver.
Here’s how the stock chart is setting up…
And here’s how the stock is setting up with my Stealth System…
- Surge score: 95/100
- % Above 52-wk low: 51%
- Sales growth: +9%
- Return on Equity: 7%
- Triple momentum: yes
With inflation at 40-year highs, it is a wonder why gold prices are not higher than they are today.
Since the start of the pandemic, the “yellow metal” has taken a backseat to new alternative assets like BTC, but that trend appears to be shifting.
While risk here is slightly higher given that it is a lower-priced stock, Yamana is showing a lot of strength over the last few months.
I think it is worth a shot on a move to new highs above $5.80. But for protection, use a stop 10% below the entry price.
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
