Weekly Update: Upside Reversal in the NASDAQ
Good evening, and welcome to this week’s edition of Stealth Trades!
In last week’s update, I talked about the importance of where the major indexes were trading.
The Nasdaq and S&P 500 were both at crucial support levels where we need to see buyers step in and confirm the validity of this new bull market.
On Thursday, we saw just that.
Both indexes started the day down at new short-term lows before rallying higher to close the day in the green.
This price action is known as an “upside reversal” and tends to be a bullish sign.
As of Friday morning, the market was continuing higher.
Famed technical analyst, Walter Deemer, once said, “When it’s time to buy… you won’t want to.”
Thursday was one of those times.
The market had been trending down for several weeks. It gapped down to start the day. But as I commented last week, I expected the 200-day moving average to hold.
So I bought.
Specifically, I bought shares of QLD – an ETF that gives you double long exposure to the Nasdaq.
And so far, the trade is playing out well…
If this is indeed a short-term low in the markets, leading stocks will likely surge over the next couple weeks.
So, I want to focus on those names breaking out from bases and/or making new highs as the market is reversing from this pullback.
Here are a few I’m watching:
Terex Corp (TEX)
This stock just won’t quit.
Bad economic report, pullback in the indexes… it just doesn’t care.
The heavy machinery stock has been riding its 10-day moving average (yellow line) since the start of the year, grinding 42% higher over the last 2 months.
I would buy any pullback in this stock and ride the trend.
Perion Network (PERI)
Perion is an Israeli-based digital advertising firm post tremendous numbers.
Sales are growing at >30% per quarter and earnings growth is even higher.
The stock dipped following its February 8 earnings report, but the stock recovered almost immediately showing a strong appetite for the shares.
This is a name I haven’t heard many traders talking about, so it is somewhat off most people’s radar… which is another reason I like it.
Resistance is clearly defined at roughly $35 a share.
A move through that level on high volume would be a buy trigger for me.
Allegro MicroSystems (ALGM)
ALGM has been screaming higher since the market bottomed in October.
The stock is up 122% over that time with no signs of slowing down.
Sales and earnings growth are both accelerating – a common thread found in past super performance stocks.
The stock has also advanced in February while the general market pulled back.
This is a clear sign of relative strength and exactly what we want to see in anything we buy.
I would consider buying a pullback in the $42 -$43 range or a breakout above $45 per share.
Best wishes for your trading,
Ross Givens
Editor, Stealth Trades