This Week in Episodic Pivots: Dec 19, 2022
Use these high octane chart patterns to turbocharge your profits
What a week. After shooting higher on Tuesday as CPI numbers came in lower than expected, the markets came plummeting back to Earth. I hope you all took heed of the Fed meeting as we talked about last week.
My personal trading plan involved taking profits on Tuesday and Wednesday, and boy was I lucky I did that. Why did I do that? Because I could see the stocks running out of steam. And I didn’t trust what the Fed was going to say.
And Powell didn’t deviate from his messaging. He said they were going to raise their expected 50 basis point. And he also said the terminal rate, the rate where the Fed would pause their hikes, would be higher than expected.
At first the market just yawned. But then on Thursday the S&P 500 fell 2.5% followed by a 1%+ drop on Friday.
A higher Fed Funds rate, for longer will depress the price of financial assets. And that announcement likely kicked off the next leg lower in the market.
Hopefully, anyone who was long either did that or hedged their position as we talked about last week. If you had done that, you’d have done pretty well.
While the market was down 2.1%, Phreesia ( PHR 0.00%↑ ) rose 9.9%, Johnson Outdoors ( JOUT 0.00%↑ ) fell 3.6%, Domo ( DOMO 0.00%↑ ) fell 5.7%, and MongoDB ( MDB 0.00%↑ ) rose 5.9%. That gave us an average gain of 1.6%. So if you played your cards right, you could have gained on your hedge AND the positions. A combined return of 2% on the week…. We’d be rich if we did that every week.
Keep Cautious Going Forward
Jerome Powell did his best Ebenezer Scourge impression last week. And it looks like we won’t see a Santa Claus rally this year. But that doesn’t mean we can’t try to make a little money going into Christmas.
I have a feeling we’ll get a repeat of 2018 this year. For anyone who successfully forgot what happened then let me give a quick recap. The Fed was raising interest rates and doing a little quantitative tightening. Here’s what happened:
Market cratered into the holiday. So it doesn’t hurt to hold some puts this week to make sure the market doesn’t surprise us.
The big swinging dicks on Wall Street have started their vacations already. They’re taking off a couple weeks at the end of the year to unwind… And get ready for what is hopefully a better year.
So the market is likely to be a bit illiquid this week.
If you’re not comfortable hedging your positions, there’s nothing wrong with taking a couple weeks off yourself. Kick back, relax, and set up a robust trading and investing plan for next year.
But let’s get on to the main event… The picks.
MongoDB (MDB)
We talked about MDB last week. And this chart looks the best going into the new week in my opinion. It showed some great relative strength last week. And then it doji’d off the 10-day moving average on Friday.
Not much else to say here. Use the 10-day MA as your stop loss at this point.
Phreesia (PHR)
This is another one from last week. Our big winner. The strength is impressive, so it’s one we can take a stab at again. I’m not as excited about this because our stop is a little wider. But it’s not a bad setup. Use the 10-day MA as the stop loss point once again.
Domo (DOMO) and Johnson Outdoors (JOUT) technically haven’t stopped out yet. But I wasn’t pleased with their weakness.
Didi Global (DIDIY) showed some great strength at the end of the week and is one to follow for the time being as well.
Natera ( NTRA 0.00%↑ )
On Friday, NTRA performed an episodic pivot which came with high volume and broke above the 200-day MA. The 200 day had previously been resistance during its recent decline. Now if it can stay above this previous resistance point, the 200-day MA can become a trampoline to move prices higher.
The news for Natera was that its non-invasive prenatal screening (NIPS) should be used over the traditional methods of screening pregnant people for fetal abnormalities.
This recommendation came from the American College of Medical Genetics and Genomics (ACMG). What they say carries weight in the medical community. And they made a “strong recommendation” for the use of NIPS to screen for several chromosome abnormalities.
This will bring in more income for NTRA with little extra cost. Look for profitability to soar as doctors start using NTRA’s tests to meet the ACMG guidelines.
ZeroFox ( ZFOX 0.00%↑ )
ZeroFox recently de-SPAC’d and just had its first earnings report while being a publicly traded company. And the cybersecurity company did not disappoint. They beat their revenue targets while giving an upbeat forecast. The CEO said he didn’t see any economic weakness impacting business.
Investors were loving it. And Friday finally we saw some massive volume as the stock surged above it’s 10 and 50-day MA. And it also broke above the previous November peak of $5 a share.
Now we can hold this stock and see if it continues this momentum higher. Use the 50-day MA as our initial stop. Move to the 10-day if the stock goes higher than $6 a share.
Conclusion
We only have 2 new stocks to follow this week. But that’s normal for a week when the market was down. We should tread cautiously going into the holiday… So mind your positions and consider some hedges.
Good luck.
For any questions during the week please tag me in a post on Twitter