Weekly Update: Major Indexes Were Up This Week
Good evening, and welcome to this week’s edition of Stealth Trades!
Finally… progress!
As of this morning, the major indexes were all up between 2% and 3% for the week.
The Nasdaq is trading at its highest level since August, and the S&P 500 broke a crucial downtrend to start a new wave higher.
It has now been three weeks since the Silicon Valley bank collapse and the market appears to have digested the news.
The dollar is also weakening which should help propel stocks higher.
I expect to see stocks rally for the next few weeks. Based on previous cycles, this should push SPY up to the 420-430 range.
I added a few more stocks to my personal account this week and am now fully invested for the first time in over a year.
My plan is to hold these trades until the S&P nears my short-term target where I will begin taking partial profits and/or tightening my stops.
As always, I will let the market dictate my actions.
If the bulk of these trades work well, I will continue to press and potentially get even more aggressive by going on margin.
If the net result is a loss, I will pull back and step down to 50% exposure.
This concept of “progressive exposure” is something I learned from a 2X US Investing Champion. By increasing your trade size when things are working and decreasing it when they are not, you can maximize gains and minimize losses.
It helps me know when to trade like a chicken and when to be a pig.
As I do every week, I wanted to share a few of my favorite stocks:
Lennar Corporation (LEN)
Lennar is a residential home builder with serious momentum.
The stock advanced beautifully off the October lows, rallying 55% in just a few months.
It then pulled back with the rest of the market in February, found support at its 50-day moving average, and is now completing a cup-with-handle base pattern.
LEN’s 10, 21, and 50-day moving averages are all stacked nicely below the stock which should provide a nice launchpad of support.
There is also resistance at the $105 level. A move up through that area could trigger the next wave higher.
With interest rates peaking and the expectation of rate cuts over the next 2 years, homebuilders are likely to see demand pick up as buyers finally see mortgage rates begin to drop.
NerdWallet (NRDS)
If you’re someone who likes to “buy the dip” on a pullback, you need to put this stock on your radar.
NRDS was one of the top-performing stocks in the first two months of the year. Sales are growing at over 40% per quarter with no sign of slowing down.
This stock got a bit ahead of itself, however, and shares pulled back in March.
Buyers stepped in to support the stock at the 50-day line on March 15th, and it has consolidated in the $16-$18 range since that time.
One of the rules I was taught when I started trading was to always buy the first pullback to the 50-day moving average.
With a market-leading stock making a big advance, that first pullback is usually a high-probability entry point.
If this stock is going to bounce from here, it should do so quickly. You can probably get away with a 7-8% stop loss here and see if NRDS returns to its highs.
Certara (CERT)
Certara just finished an exciting March.
The medical software company surged 15% to start the month after reporting a solid beat on earnings for the quarter.
It jumped again on March 16 when Dow Jones announced the stock would be joining the SmallCap 600 index. Stocks always jump on news like this since it means thousands of funds and ETFs which track this index will have to buy the stock.
The addition was completed on March 21, providing a final boost to CERT’s share price.
As you can see in the chart above, shares have consolidated around the $24 level for the last two weeks. This is unsurprising given the significance of this level.
In the weekly chart below, you’ll notice how CERT stock collapsed here back in July.
Investors who bought the stock prior to that time who have been waiting to get out at breakeven are likely taking profits at this level.
A move above $25 to new 52-week highs, especially if it happens on high volume, would be a tempting buy signal.
Best wishes for your trading,
Ross Givens