Current Focus List
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.
General Observations:
The NASDAQ Composite and S&P 500 Indexes both made new all-time highs as formerly broken tech leaders came back to life. Despite the breakout in the NASDAQ Composite, many tech leaders remain within consolidations or are simply having reflex rallies off of their prior lows. However, there are possibilities that the recoveries in many of these names could help them to set up again as they complete corrections and new base-building periods.
The market's path to new highs has not been a smooth one, as shown by the daily chart of the NASDAQ Composite, below. Sharp shakeouts that have also seen leading stocks get hit with heavy selling are followed by relatively quick moves right back up to new highs. This has occurred three times since the index broke out in late September. The early December sell-of has proven to be no exception. For now, the major averages look like they want to rally into year-end, but the true test will be in how well individual stocks are able to make progress on the upside.
The Market Direction Model (MDM) remains on a cash signal after getting shaken out near the lows last week based on the action of leading stocks. With so many cross-currents and divergences, the model has encountered conflicting signals which can throw it off in the short-term.
Removed from the List this Week: None.
Focus List Stocks Expected to Report Earnings this Week: None.
Notable Action:
Caterpillar (CAT) remains extended. Pullbacks to the 10-dma would be your next references for lower-risk entry opportunities.
Facebook (FB) posted a pocket pivot at its 20-dema on Friday. Volume, however, was likely skewed by triple-witching options expiration, and we will have a chance to see how legitimate the pocket pivot was this coming week.
Names that were recently removed from the Focus List on the basis of 50-day violations or other selling guides are mostly engaged in oversold rallies off the lows of nearly two weeks ago. Some have regained their 50-dmas, such as Facebook (FB) and Take-Two Interactive (TTWO), but we see potential for names like Alibaba (BABA), Netflix (NFLX), Nvidia (NVDA), and even Weibo (WB) to rally further up to or through their 50-dmas. We noted last weekend that Three examples illustrate what we're looking at here:
1. The clean moving average undercut & rally up through the 50-dma. Take-Two Interactive (TTWO) looked like a "textbook" short as it rallied into the 50-dma and stalled. But in this market textbook occurrences that applied to past markets don't necessarily play out the same way. Gil has found that rallies up into the 50-dma have a better than 50% chance in this market of simply rallying up through the 50-dma, which he has termed the moving average undercut & rally (MAU&R) long set-up. This has been discussed at length in the weekly live webinars.
The stalling action at the 50-dma on light volume on both Wednesday and Thursday of this past week looked like the stock was about as ripe as it could be for a short-sale entry. On Friday, shorts were thrown for a loop as the stock cleared the 50-dma and held on very heavy options expiration volume. In this case, one simply acts on the MAU&R set-up and flips from short to long, using the 50-dma as a tight selling guide. With TTWO's cousin, Activision Blizzard (ATVI), breaking out to new highs on Friday, TTWO may have a shot at attempting the same thing, as long as it holds above the 50-dma.
Weibo (WB) is one to watch as something Gil has identified as the "50-dma violation fakeout." This is where a technical violation of the 50-dma simply fakes investors out, and the stock does not go lower. Instead it sets up in a Wyckoffian Retest, where the stock pulls back to test the violation low and holds above it as volume dries up. It then rallies up to or through the 50-dma. Note that WB is sitting just a hair below its 50-dma after a low-volume pullback and retest of the low of eight trading days ago on the chart. If this clears the 50-dma this week, then it would then turn into a successful Wyckoffian Retest and MAU&R set-up on the long side, using the 50-dma as a tight selling guide.
Nvidia (NVDA) is another one of these 50-dma violation fakeouts that combines with a U&R after the stock undrcuts a prior low in the pattern. That set a low that was then tested on Thursday of this past week as NVDA tried to move lower intraday but held tight instead as volume dried up. On Friday the stock regained the 10-dma on a five-day pocket pivot. Another five-day pocket pivot at the 10-dma would be constructive, and would trigger NVDA as a long here with the idea of looking for at least a move back up towards the 50-dma.
Note also that NVDA looks like a "textbook" head and shoulders topping pattern, but in the end an H&S top is as an H&S top does, and if it doesn't roll lower from the right shoulder, as outlined on this chart, it can easily recover in Ugly Duckling style by retaking its 50-dma. This is a QE-driven market where money comes out in a hurry and then trickles back in, "reflating" a move back to the upside where U&Rs, MAU&Rs, Wyckoffian Retests, and bottom-fishing types of pocket pivots, including five-day pocket pivots, become relevant as Ugly Duckling long entry signals.
This is an unusual market environment where the old "rules" are challenged every day, and often do not prove out. On the other hand a contrarian, "Ugly Duckling" approach that uses unorthodox, but still concrete, long set-ups that Gil has identified and cataloged can often be a smarter way of operating that is more opportunistic on weakness than reactive to strength.