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:
This was an historic week for the market, coming on the heels of the prior week's break from all-time highs in what was the fastest 10% correction off the peak in market history. This week we've seen Dow point moves that have exceeded anything seen before and a 10-Year Treasury Yield that is now under 1%, ending Friday at 0.732%, thanks to Tuesday's surprise 50-basis point emergency rate cut from the Fed. The QE spigots are now wide open, but it all gives the impression that the Fed is panicking. While they have repeated the mantra that the economy is "in a good place," apparently that does not remain the case.
The NASDAQ Composite Index broke hard and retested its 200-dma on Friday, rallying into the close on volume that was the lightest over the prior eight days. This may imply that an oversold rally back up towards the 10-dma, 20-dema, or 50-dma is likely, but the market may remain trapped in a volatile and wide bear flag. While this can create short-term swing-trading opportunities for nimble traders, it is much more difficult for longer-term investors to buy in with confidence until things begin to settle down and achieve some sense of coherency.
The Market Direction Model (MDM) switched to a CASH signal and then to a SELL signal on Thursday into the bounce that then failed to sustain its momentum.
Removed from the List this Week: ADPT, CROX, GOOG, FB, LULU, MSFT, and V.
Stocks on the List Expected to Report Earnings this Week: Franco Nevada (FNV) on Tuesday after the close.
Notable Action:
Amid all the mayhem in individual stocks, nimble swing-traders may want to remain aware of where Ugly Duckling set-ups might occur as the indexes get ever more oversold. Such set-ups can produce sharp, playable upside moves as was the case two Friday's ago if one is alert and bold enough to act. Risk should be kept to a minimum, however, by keeping entries close to key support levels and then using those support levels as tight selling guides. For those not psychologically oriented towards swing-trading, then cash is king.
Something like Virgin Galactic (SPCE) can be monitored as it comes in to retest its 50-dma. Note that volume has been drying up on the way down which gives this the look of a test for supply, what we also call a Wyckoffian Retest. Friday's volume was -40.4% below average which qualifies as a voodoo pullback, but SPCE remains about 10% above its 50-dma.
Tesla (TSLA) is a similar situation as it pulls in to retest its 50-dma as well. Watch for a lower-risk entry to emerge here on the Wyckoffian Retest as volume declines. In this position the stock could be bought using Friday's intraday low as a tight selling guide, with the idea of catching a swing-trade back up to or beyond the 10-dma and 20-dema. Again, this is intended for nimble swing-traders as the market environment could remain volatile and choppy.
Biogen (BIIB) also looks interesting here as it sits right on top of the 50-dma. This could offer a lower-risk entry for a swing-trade using the 50-dma as a tight selling guide.
Shopify (SHOP) may also be in a position IF the general market posts an oversold rally this week. The stock showed some supporting action at the 50-dma, and if it can hold the line it may offer a swing-trading entry here along the 50-dma while using the line as a tight selling guide.
Earlier in the week we reported on some potential short-sale targets among the home builders. Note how Lennar (LEN) rallied just above its 20-dema on Wednesday but failed at the line on Thursday, triggering a short-sale entry at that point. Had one shorted the stock into Wednesday's move into and just beyond the 20-dema, that would also have worked. The stock then gapped below its 50-dma today so that rallies back up into the moving average might offer secondary short-sale entries from here.
D.R. Horton (DHI) is a rough mirror-image of LEN, acting in the same exact way over the past three days since we issued the Short-Sale Set-Up report on the builders. Short-selling in this market has remained difficult primarily because of the heavy intraday volatility and is best pursued by those who are experienced on the short side and psychologically nimble and persistent traders. Often the first attempt at shorting a short-sale target does not work, but if one is persistent eventually the stock can give way for a profitable short entry. Friday's gap down means the stock is now extended on the downside, so as with LEN rallies up to the 50-dma could offer lower-risk short-sale entries from here.
We remain bullish on precious metals, and the Fed's 1/2-point rate cut this past week reinforces the bull case for gold and silver. The SPDR Gold Shares (GLD) has outperformed the iShares Silver Trust (SLV) this week to post an eight-year closing high. But, we can see that the proper entry on weakness occurred last week when the GLD tested the 50-dma on heavy volume. The SLV also bottomed on the same day and has also moved higher but remains well off its highs. As is often the case with the precious metals, one must seek to buy on weakness while resisting the temptation to buy strength.
While the GLD is extended in a v-shaped formation, the SLV retested its 200-dma and held on Friday in a show of supporting action at the line as volume came in heavy. This puts it back in a lower-risk entry position using the 200-dma as a tight selling guide.
Given the corona black swan, the fragile global recovery is being handily derailed. Crashing markets can in and of themselves induce recessions as it harms investor psychology. Bloomberg just reported that the entire city of Milan is being quarantined. Meanwhile, because one can remain asymptomatic for at least a couple of weeks, quarantines do little to contain the virus. Mainstream media will pounce on the coronavirus being mutative thus not being containable while undermining the fact that its mortality rate is below that of other viruses such as SARS and MERS. In other words, the virus will burn itself out but the world's overreaction will end up excessively damaging the global economy due to severe quarantines and supply chain disruptions, costing jobs, livelihoods, and, as a result, can spur second order health consequences unrelated to the virus. The silent epidemic known as stress is a killer.
With interest rates going even lower and fiat being debased, hard assets (bitcoin, real estate, precious metals) benefit. The sinking "fiatitanic" means more dollars/euros/etc are required to buy the same hard assets. Bitcoin remains in a general uptrend. The recent weakness is a buying opportunity. MACD, RSI, and Squeeze Momentum all show it is still not too late to buy the Grayscale ETN GBTC which tracks the price of bitcoin.
