When the markets were in turmoil just a few sessions ago, I mentioned to you how it was good ole’ fashion sector rotation.
That chart paints an entirely different picture of the market to me, and from what the data is telling me… stocks are headed higher for the time being.
From all the information I’ve analyzed, whether it’s measuring increasing interest based on large institutional purchases, unusual options activity, or simply my proprietary lists of trending tickers…
I’ve narrowed down a list of three stocks I believe can break out.
The arguments for the bears are typically, Stocks are too high… they’re overvalued and we’re due for a pullback… there’s so much risk on the table, people are going to start selling their positions and getting defensive.
I don’t know about you, but with the way the price action has been… to say something is “too high” is just not justified.
Instead, it’s more important to focus on price action, and I want to show you how I utilize charts to my advantage.
The best way to do so is by providing actionable ideas of specific stocks I believe can move.
This is the Israeli-based E-Commerce platform, Fiverr International (FVRR).
Note the incredible relative strength from Fiverr since coming public last summer. It’s showing no signs of stopping either as the stock just made a new record relative high as it resolves higher from a continuation pattern.
The question that remains is will it resolve higher from its multi-month continuation pattern on an absolute basis as well?
Considering the way its resolved higher from its last two consolidations, and constructively paused at logical levels of resistance to digest gains before accelerating higher, this trend should be treated as innocent until proven guilty.
I want to buy FVRR on strength above the recent closing high of 125 with a 3-6 month timeframe and target at 200.
Next is another online retailer from outside of the US. Regardless of where these companies are from, this is one of the hottest industry groups in the market right now.
I like to stick with what’s working, and just like Fiverr above, this next name definitely has been. Here’s the Chinese mobile E-Commerce platform, Pinduoduo (PDD).
Following a strong move off the March lows, Pinduoduo has been consolidating above my most recent price objective for the past three months. At the same time, it’s been coiling in a bullish continuation pattern relative to the overall market.
Price isn’t far from all-time highs on both relative and absolute terms. The risk is very well-defined at $77, a level that buyers have already successfully defended twice.
I like how this stock has corrected mostly through time instead of price, constructively digesting its recent gains while its uptrend remains intact. I think it’s ready for another leg higher.
As long as PDD above $77, the risk is to the upside and I like PDD long with a 1-3 month target at $114.
Sticking with the “tech of non-tech” theme, here is the tech of real estate, Zillow Group (Z).
The company operates in the internet-content space for the most part, but does have exposure to real estate- both indirectly and now directly (which is an interesting new company-initiative… worth looking into), and is thus classified in that sector.
Multi-year base breakouts to fresh all-time highs on both absolute and relative terms
Price is now consolidating just beneath our objective at the 161.8% Fibonacci extension of its base. I want to buy Zillow on strength back above this $90 level with a 3-6 month target at $129.
I want you to keep an eye on these stocks because I wouldn’t be surprised if they all get to my targets. Stocks have been following specific patterns, and through my data-driven approach, they typically play out to my expectations.
It’s been the same old story for the past few months— tech stocks continuing their rally…
But the market just flipped the script.
Tech stocks have been under a bit of pressure, and some are wondering whether they’ll lead the entire market lower.
To be honest with you, I just can’t buy into that because all the data that I’m looking at tells me otherwise.
Instead, all of the price action and market activity I’m constantly analyzing tells me we’re still in a bull market…
A market where traders are generally rewarded for owning stocks if they know where to look.
I will admit there is some sector rotation going on, and the so-called “laggards” of the market may now become the leaders.
Let me show you what I’ve uncovered and which specific stocks I’m looking to get into.
When money is coming out of one sector and going into another one, it’s known as sector rotation. It’s a classic characteristic of a bull market.
Let’s go back to February. At that point, we were seeing laggards dragging the market lower. Things like Financials and Materials were making new relative lows and had already begun their declines.
In fact, both of these sectors peaked in December, months before the overall market peaked. That’s part of why I got so bearish.
So anyone who tells you that this year’s crash “came out of nowhere”, is really just fooling themselves.
This year’s stock market crash came after more warning signs than any crash in U.S. history. I’ve said it before and I’ll stand by that.
The reason I bring this up is not to take a victory lap. That doesn’t add any value. My point here is that today we are seeing the exact opposite of what we saw then. The laggards were lagging and dragging back then. Today, those laggards are the leaders!
Financials are hitting new relative highs, NOT new lows (like they were in February).
Materials are making new all-time highs! And after doing nothing for 32 months, the higher probability here is that Materials are just getting started!
With XLB breaking above $62, I think it makes a move to $78 and we’ll see more materials stocks pop off.
Who’s pulling Materials higher? Look at Chemicals breaking out of this monster base to new all-time highs.
Here’s how these guys look on a relative basis…
Outside of Chemicals, it’s hard not to think of Freeport-McMoRan (FCX) when we’re talking about Materials. And what is FCX doing?
New Multi-year highs for the 3rd consecutive week:
There are serious global implications here as you can see above. If emerging markets are ripping higher and money is rotating into the lagging sectors (that needed to see rotation, I might add), then what does that mean for equities as an asset class?
Higher or lower?
To me it means higher! And probably much higher!
So we’re spending our time looking for stocks to buy.
The best part of this whole thing, in my opinion, is that since a lot of these names we’re describing have relatively small weightings in the major U.S. indexes, you see the lazy talking about market crashes and “Tech Wrecks”, and they’re totally missing the rip-your-face-off rallies taking place outside of Tech.
Listen, I take all this information and use my “funnel” to filter down all this information and turn it into actionable ideas. Let me show you how to do it. Click here to sign up for this exclusive event.
Given the rise in recent volatility, it’s natural for traders to get shook and look for ways to protect their accounts… and short stocks.
It’s just the way it goes if you let your emotions get the best of you.
You probably know what can happen if you let emotions get the best of you. That’s why I aim to take the human element out of my trading and only focus on the data.
To be honest with you, when I look at the S&P 500 Equal Weight Industrials ETF (RGI) vs. the S&P 500 Equal Weight ETF (RSP)…
It signals healthy sector rotation, rather than a market crash. When I used my “funnel” approach and dug deeper, it’s not a market I want to be shorting.
Instead, there are specific stocks I want to be long if they break above their respective key levels.
Let me show you three hot trade ideas on my radar, and my plans for them.
When it comes to generating trade ideas, I’m focused on price action and uncovering key areas of supply and demand.
The first hot trade idea on my radar is Pinterest Inc (PINS).
After a nice power earnings gap towards its 2019 record highs, the price has been consolidating around this area for over a month now.
I want to see relative strength start trending higher again and prices make a sustained move above $36.80. These things are likely to occur together. If and when they do, I want to buy strength in Pinterest with a 3-6 month target at $53.
If you’re out on the water fishing a lot like I am, you’ll definitely be familiar with the next name. YETI Holdings (YETI) is on my watch. It’s a company that specializes in making top-notch products for the outdoors market.
The stock resolved higher from 12-month+ base breakouts both on absolute terms as well as relative to the Russell 3000 this summer. It has solidified its place as an outperformer off the March lows.
I want to own YETI, if and only if price is back above our recent objective of 52. Under this scenario, I’ll be targeting 74.50 over a 3-6 month timeframe.
Last up is the Customer Relations Management platform, Zendesk (ZEN).
I want to see ZEN stay above $94-$95 right now.
The base relative to the overall market looks ready to break to new highs next. If it can break above that blue rectangular area, I wouldn’t be surprised if ZEN makes a move to the $120 area.
If you want to find out how I utilize data to my advantage and uncover trade ideas like the ones above, then click here and sign up for this exclusive training session.