Weekly Update: Big Movers in a Strong Week for Stocks
Good evening, and welcome to this week’s edition of Stealth Trades!
This was one of the strongest weeks for stocks I can remember.
The indexes performed very well. The Nasdaq gained roughly 4% and the S&P was up 2.5%.
But there were some huge movers in the areas we have been focusing on.
AI continues to be the theme of this bull market. Stocks with exposure to artificial intelligence are by and large outperforming other names.
We have been cherry picking this basket of stocks to find setups within this leading group, and the results have been tremendous.
My analyst and I also noticed a lot of money flowing in the crypto space over the last couple weeks.
Look at the huge increase in trading volume in the Grayscale Bitcoin Trust (GBTC) over the last several weeks (see chart below).
Bitcoin has been flying which triggered a group move.
Mining stocks, crypto brokers, and even payment processors who accept Bitcoin all began surging together.
We bought a few of them in my Alpha Stocks service from low risk buy points and saw quick profits.
The first two are cryptocurrency mining stocks. The last one is Coinbase – the preferred custodian for most of the new crypto ETFs under development.
I show you these charts not to boast, but to show you what is possible in a good market by simply focusing on leading groups and buying those stocks when they break out of consolidation.
You don’t have to stick to leading groups. Winning trades can be found in other areas as well.
Redfin manages a residential real estate database. And Nikola makes battery and hydrogen-powered semi trucks.
Both of these stocks delivered big gains as well:
But if you want to make things as easy as possible, focusing on the best-performing groups and sectors will greatly increase your odds of success.
Another factor that helped propel stocks this week was a weak dollar.
All things being equal, stock prices tend to move inverse of the US dollar.
Note the dollar’s performance during last year’s bear market in the chart below:
Today that chart has flipped, and the USD just broke down through support.
The market has been on fire. A collapsing dollar added diesel fuel to that fire.
Will the dollar keep falling? I don’t know. From a technical perspective, it looks to be heading lower. And news stories about BRIC nations creating their own currency and moving away from the US dollar are only making things worse.
The market is extended, yes. And we could see a pullback any day. But I plan to buy into that if it happens.
Look for the best-performing stocks. Focus on the ones within 5-10% of new highs when the rest of the market is pulling back.
That is how you find winning stocks.
Here are a few I am watching right now:
Unity Software (U)
Unity looks really attractive to me. We talked about this stock in Thursday morning’s live War Room session, and I bought a few hundred shares at that time.
Pull up a weekly chart of U and you will see a stock trying to break out of a 14-month Stage 1 base.
Shares ripped through the 200-day moving average (white line on chart) in early June and have held above the 21-day (blue line) ever since.
A series of shallowing retracements show the market working through supply at what has been resistance for many months.
Growth stocks pulled back on Friday, giving traders a second chance to buy this one near the $44 mark.
Do not risk more than 10% on the trade.
Shopify (SHOP)
Shopify is emerging from a beautiful Stage 2 base.
SHOP is up more than 100% since the start of the year – a clear sign this is a market leader.
Notice how volume is higher on the rallies up and lower when the stock pulls back. This is a subtle clue that buyers are in control and the smart money is building a position.
The breakout on Thursday came on 2X its average daily volume and the stock closed at the high of the candle – both good signs of a legitimate move.
I want to see SHOP stay above the breakout level or, at a minimum, above its 21-day moving average.
SmartRent (SMRT)
SmartRent offers a home automation platform for property managers and renters.
While this is not a pure play on artificial intelligence, it somewhat fits into the AI/tech /software theme we see playing out.
It is only about $4 a share, but the company market cap is $770 million. This is not a longshot penny stock with no sales.
After consolidating in the $2-$3 range for 8 months, SMRT started moving in May. Shares rose by 75% in three weeks following a strong earnings report.
It is now trying to break through resistance.
Friday’s candle had a 10% range from low to high showing something of a tug-of-war at new highs.
If SMRT can close above $4.00 on above average volume, I would consider buying this stock.
Best wishes for your trading,
