Weekly Update: S&P 500 Was Down but No Danger Signs Yet
Good evening, and welcome to this week’s edition of Stealth Trades!
As of Friday morning, the S&P 500 was down roughly 2.4% for the week.
Volume, however, was light, so I don’t see any serious danger yet.
Pullbacks are natural, and forming a bottom is a process of backing and filling near the lows which often forms a rounded bottom pattern.
I remain bullish on stocks and believe we are at the early stages of a new bull market.
Instead, I am using this short-term weakness to identify stocks holding up well that can be bought on pullbacks to key support and moving averages.
Below are a few of the stocks on my radar right now:
United Rentals (URI)
United Rentals is a commercial leasing stock. Industrials and heavy equipment names are one of the leading areas over the last several months, and URI is a top name.
The stock formed a textbook breakout pattern with a shallowing base and resistance near $374.
It was off to a good start but pulled back this week on general market weakness.
Shares are currently retesting the prior breakout level as well as the 21-day moving average (blue line).
A good trending stock should hold its 21-day as URI has since mid-October, so this is a low-risk area to take a stab at this one and take a position off this support level.
Buckle (BKE)
Apparel and retail names like Buckle have also been strong for the last few months.
BKE has been holding its 21-day moving average beautifully throughout the entire move.
Shares have now pulled back to it once again and are sitting at the most recent breakout level.
One may consider buying here with a tight 5% stop loss to see if the trend continues.
Foot Locker (FL)
One of the best-looking charts in the retail sector belongs to Foot Locker.
Above is a weekly chart to show the full picture.
Notice that FL has been in a Stage 4 decline since early 2021. Shares bottomed this Summer and have slowly formed a rounded bottom to complete a new Stage 1 base.
The stock is now consolidating in a pattern of shallowing retracements just as we like to see.
Resistance is clearly defined at $40 – a key support zone from the end of last year.
A move above this level would trigger my entry for a potential multi-month move higher.
Tactical traders may instead choose to build a smaller position here in the $35-$40 range and add on if and when the stock breaks out.
Best wishes for your trading,
Ross Givens
Editor, Stealth Trades