Weekly Update: Bears Losing Ground and Tech Stocks Leading the Way
If this market moves any slower, it is going to get a parking ticket.
The S&P 500 index continues to consolidate in a tight range as it has been for the last six weeks.
This is not necessarily bad news, however. In fact, I believe it is just the opposite.
Excluding anomalies like the 2020 V-shaped correction, markets do not go straight up after a bear market.
There is a period of backing and filling that takes place as bulls and bears battle it out for direction.
Stubborn bears who are convinced we have lower to go sell into the initial rallies and cap the moves higher.
This causes pullbacks which are bought by bullish traders trying to build back the positions they sold in the bear market.
These conflicting forces cause range-bound action which can be frustrating to say the least.
But stocks are holding up well. And sellers are no longer in control.
We are nearing the end of earnings season and the results have been good overall. Bad numbers from any of the key players could have sent the major indexes tumbling. More dovish language from Powell at last week’s Fed meeting would have also been trouble.
But the market survived these potential landmines and held its ground.
It has been 214 days since the market made a low. Bears are steadily throwing in the towel, and we have seen a series of higher highs and higher lows.
CNBC is too scared to say it so I will…
THE BEAR MARKET IS OVER.
Pullbacks should be bought, and investors should focus on market-leading stocks that have made the largest advances since the October low.
So far, tech is leading. The Nasdaq index is outpacing the S&P 500 – currently up 28% since October vs only 19% in the S&P.
The tech-heavy Nasdaq is also making new highs as you can see in the chart below:
Here a few powerful stocks to have a look at:
TG Therapeutics (TGTX)
Biotech stocks can make huge moves, and this one is no exception.
TGTX more than doubled in a month and is showing no signs of slowing down.
Slower-trending, blue chip stocks tend to ride their 50-day moving average (red line on chart) on the way up.
Stronger stocks tend to hold their 21-day moving average (blue line).
But with high-flying honey badger stocks like TGTX, you are lucky to get a pullback to the 10-day (yellow line).
TGTX touched its 10-day exponential moving average on Friday, making the first real pullback buying opportunity since the initial surge.
I would consider buying here with an 8-10% stop loss.
Datadog (DDOG)
Datadog is trying to put end to what has been a vicious Stage 4 downtrend.
The stock fell 68% in last year’s bear market but is now rising quickly off the lows.
DDOG has reclaimed its 200-day moving average (white line on chart) for the first time in over a year after reporting better-than-expected earnings numbers last week.
The stock has stalled just under $90 per share where it has seen resistance previously. I would like to see the stock consolidate for a few days in this area (yellow triangle) to digest any sellers and then break out to new highs.
A move through $90 on above average volume would be buyable for me.
Funko (FNKO)
Much like Datadog, Funko took a beating in last year’s bear market.
But the stock is quickly coming back to life. FNKO surged on earnings last week and has given back almost none of the initial move.
Shares are barely retracing and doing so on minimal volume – a sign that no one is selling.
This trade is pretty simple – draw a trend line and buy when it breaks above it.
A good breakout should not retrace to the low of this consolidation (currently 10.74), so you could take a stab at this one with very little risk.
Best wishes for your trading,
Ross Givens
Editor, Stealth Trades