Weekly Update: Remaining Bullish for the Market

Good evening, and welcome to this week’s edition of Stealth Trades!

​​Hopefully you took some of the trade ideas I gave you in last week’s update.

HIMS is up over 17% since outlining it in last Friday’s email and ONON is up almost 6%. Those are solid gains in a week where the indexes went nowhere.

I bought 1,000 shares of HIMS last week, and I’m kicking myself for not buying more.

For the overall market, I remain bullish and expect stocks to move higher over the next few months.

In the weekly chart of the S&P 500 below, I’ve drawn in yellow what I expect to see.

Notice the wedging action we have seen since markets bottomed in October. This is constructive action.

Stocks have done the usual “backing and filling” to carve out a bottom and set up for the next leg higher.

In order to achieve above average returns, however, we must continue to focus on the best stocks in the best groups. This is where we tend to find the biggest winners.

Right now, some groups look better than others.

Fiber Optics stocks, for example, are being massacred:

I would not buy a stock in this group no matter how good the chart or the numbers looked.

Residential builders, on the other hand, are trending upward:

Stocks in this group like DHI, TPH, PHM, MHO, and MTH are all advancing nicely and in confirmed uptrends.

My favorite trade setup, when I can find it, is a group or sector setting up in a breakout pattern and a top stock within that group setting up at the same time.

This combination of a group move and an individual stock within that group can lead to a strong advance higher.

One group that looks appetizing to me here is leisure gaming.

The chart above is from MarketSmith, and it shows the combined price action of all stocks in the group.

Here are 3 favorite gaming stocks in the group:

DraftKings (DKNG)

DraftKings is breaking out of a clean base in the beginning of a new Stage 2 uptrend.

The stock is up 13% this week but running into longer term resistance.

It is clear in the weekly chart below:

Ideally, DKNG would consolidate for a few days in the $21-$22 range to absorb any supply from sellers looking to exit near 52-week highs.

There are 2 places I would consider buying this stock…

First would be a breakout to new highs above $22 on above average volume. This would signal to me that funds are still buying heavy, and I would want to be along for the ride.

The other potential buy point would be a pullback into the moving averages and this week’s breakout area.

At $19-$20 a share, I would be a buyer in DKNG with a sell stop just beneath the 50-day moving average.

International Game Technology (IGT)

IGT just made new 52-week highs.

After a shakeout move in mid-March, the stock completed a textbook cup-with-handle pattern and broke out through resistance at $27.

The 200-day moving average has turned up, and all other key moving averages are trending higher and supporting the stock.

Depending on one’s risk tolerance, IGT could be bought here.

My stop would be at 25.75, just below the 50-day moving average and the recent swing low. That would equate to a risk of 8.4% on the trade.

If IGT pulls back to the $27 area, that would be a great place for a pullback buy or to add on to the position.

Studio City International (MSC)

Studio City is a Hong Kong-based resort and casino located in Macau.

After finding support at the $2 area last year, the stock emerged from its slumber to advance in just two months.

It has been consolidating since January and now appears ready to go another leg higher.

This is a low-priced, thinly traded stock and as such, carries more risk. So, we want to be precise with our entry on this one.

Active traders might consider buying near $7 with a stop loss at 6.30.

Best wishes for your trading,

Ross Givens

Editor, Stealth Trades

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