Current Focus List
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The VoSI Focus List is a compilation and reference list of stocks for which Pocket Pivot or Buyable Gap-Up Reports have been issued and which have been deemed suitable for inclusion on the Focus List. Not all stocks for which a Pocket Pivot or Buyable Gap-Up report has been issued will necessarily be added to the list. It is not intended as a "buy list" or a list of immediately actionable recommendations. Stocks on the list may or may not be in proper buy positions, and investors should exercise discretion and proper judgement in determining when and where stocks on the Focus List can be purchased. The following notes are intended to assist in this process. Please note that members can enlarge the Focus List image by clicking on the body of the email and then holding the Control Key while pressing the "+" key until it is large enough to read.
Volatility with price velocity remains the rule of the day, as the daily chart of the NASDAQ Composite Index, below, illustrates so well. A massive gap-up open on Monday following what was promoted as a positive dinner meeting between Chinese President Xi and President Trump last Saturday night at the G-20 Summit in Buenos Aires, Argentina gave way very quickly on Tuesday, with the Dow plummeting more than 800 points. News late Wednesday, when the markets were closed for a national day of mourning, that the CFO of Chinese Telecom giant Huawei had been arrested in Canada for violating sanctions against Iran at the request of the U.S. Justice Department sent the indexes down sharply Thursday morning.
But dovish comments from one Fed Head later in the day helped reverse the indexes, with the NASDAQ closing positive on the day while the Dow retraced all but 77 points of a 777-point decline earlier in the day. A small upside opening on Friday after a weak jobs report further the theory of a Fed on hold was quickly met with selling as the indexes rolled over and closed at lower lows for the week. Note the sharp downside velocity where the index has taken only three days to approach the prior October and November lows. At this stage, the NASDAQ is heading for the lows of a downward trend channel with lower highs and lower lows along the way.
While we have not found a Black Cross, where the 50-dma crossed below the 200-dma, to have much predictive value in most cases, it is interesting to note how this presaged Monday's stalling and churning gap-up to the 50-dma that was then followed by a high-velocity break to the downside into the end of the week. Overall, the action remains bearish, and unless one is oriented towards the short-side, cash is king outside of any short-term swing trades one may be attempting. In most cases, however, the long side has only offered brief flashes of upside in what is mostly a bearish backdrop for individual stocks.
The Market Direction Model (MDM) moved to a cash signal on Monday about an hour after the open.
We issued a Short-Sale Set-Up report on ZScaler (ZS) on Thursday as the stock was rallying sharply after earnings. The stock finally rolled over on Friday after a brief upside move past the 43 price level and the prior 42.48 peak of mid-November. Notice that this is a very jagged, complex head and shoulders with the peak of the head occurring at 48.24 in late August. In our view, ZS is vulnerable to PE-contraction in any continuing market correction. This rally brought it right up to the peak of a second right shoulder in the pattern, and the stock rallied about 2% past that peak on Friday before rolling over. Timing short-sale entries is tricky in this market, and we discuss the use of the five-minute 620-chart as a tool to use in this regard in our live webinars. Any retest of the prior 42.48 November peak or Friday's peak at 43.40 would bring this into a more optimal short-sale range. Otherwise, a breach of the 50-dma would trigger a second short-sale entry from there.
ZS' weekly chart gives a better view of the overall head and shoulders formation, with this past week's action showing a high-volume stalling type of move on the weekly price bar. Note the extremely jagged look of this formation.
As with all Short-Sale Set-Up reports, members should understand how to implement the short side of the market, and have a strong working knowledge of the methods and techniques that have been discussed in Short-Selling with the O'Neil Disciples (John Wiley & Sons, 2015) and our live webinars, where we discuss our latest updates and refinements to short-selling methods.