Patience Might Not Be the Trader's Strong Point, but This Market Demands It
By waiting, traders might miss a move, but the best advice is to wait for patterns to shape up.
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Note: I will be on vacation for the next week. The next edition of Top Stocks will be Monday, Sept. 1.
The Market
In the very short term we know the general rule: The longer a positive or negative streak for a stock or an index goes on, the more likely we are to get a rally if down or a pullback if up. With Nasdaq at six straight red days and the S&P at five, there'd be no surprise to get a rally on Friday, no matter what Chairman Powell says.
Also none of the indicators changed after today, and that is despite the fact that we had more upside volume than downside volume on both the NYSE and Nasdaq.
Since I will be gone for a week, I want to explain something about some of the high-flyer stocks. When I say I would like to see a pattern shape up, here’s what I would like to see.
Let’s begin with Coinbase COIN because this is a stock I have made that comment about. Do you see that blue box with the head and shoulders bottom drawn in? That was a pattern setup (and I did recommend the stock then).
Now look at the green box and the line (I also recommended the stock then). There we had a digestion take place off that gap up from the head and shoulders bottom. That pattern also tagged the (now broken) downtrend line.
So I need to see some sort of pattern shape up. I can imagine a pattern, but right now the confidence level is low on how it will play out. But note that the chart has been correcting for about a month now. My guess is that if we can get a pattern to set up, we will see it develop over the next four to six weeks.
I made a similar comment about Palantir PLTR. The first thing it ought to do is bounce off this line. But I want a pattern to develop.
I don’t know whether it will develop the same way, but look at the green box and line. Do you see how the pattern is similar in how it came off the high at 120? A big whoosh, an attempt to hold the line, then down some more (to fill the gap, so that’s different from now).
Then there was a rally and one last whoosh into April. That correction was about two months in duration, but the pattern set up as the stock formed a W (green box). I know I recommended PLTR back then, I cannot recall whether it was at 80 or 90, but I hope you can see the pattern shaped up.
As traders, we are not known for our patience. I know I certainly am not. By waiting, I might miss a move but my style is to wait for a pattern to shape up.
So that is how I would view the market in the coming weeks because we all know that if these uptrend lines break at some point in September, we will quickly go from complacency to hysteria.
New Ideas
One stock that has been on my list of stocks to watch for possible breaks was GE Aerospace GE. Notice that it has threatened but thus far has held that 260 area. So thus far this winner has not seen selling once the indexes did. This should stay on the watch list.
Today’s Indicator
The 21-day moving average of the ISE call/put ratio is heading down (and has been for almost three weeks now). If we get some downside in September, this ought to plunge, and the lower it goes the more positive it is (ultimately) for the stock market. But it needs to come down more.
Q&A/Readers' Feedback
Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.
I really thought PPLT, an ETF to be long platinum, was forming a flag in this 120 area before it headed lower (toward the uptrend line). While that is still a possibility, I would now say as long as this 115 area holds this looks like a standard correction. I would like to see it do a bit more work, perhaps with one more trip into that 120 area, before it feels as if it has done enough work. But I will respect that 115ish stop.
Iren IREN hit its measured target when it got to 20, so now it looks as if it needs to spend some time consolidating. A stop under 15 feels too far away, though. Overall, I would say I am neutral on it. However, another name that I am told is in the same group is Cipher Mining CIFR, and that looks quite interesting to me. If it can stay over 4.50 and then get over 7ish, that would make for a good chart.
Centrus Energy LEU has hit its measured target off the base that broke out over 120. For the time being it looks vulnerable to a break of 160. I would change my mind if a month or so from now it was still over 160.
SentinelOne S is trying to form a base, as it has traded between 16 and 20 for months now, well, since the April low. I would keep playing the range unless/until something breaks down or out.
