It’s always nice when the trading week gets started on the right foot. So today, let’s quickly recap the start to the week and then take a closer look at some stocks that might be poised to keep running today. Sound good?
Tuesday Morning Market Update:
To get us started, I always like to begin with the big picture. It’s just an easy way to get oriented and establish whether buyers or sellers should be given the benefit of the doubt (as informed by the long-term trend).
I already showed you the long-term weekly chart yesterday, and you’ll recall it was up and to the right. So understanding bulls have the long-term momentum, for now let’s zoom-in on the daily time frame:
As you can clearly see, price is back near recent highs (and all-time highs, too). But the thing I’m watching here is the nature of the price action. Basically, I expect a little resistance at these levels. So I want to know how price reacts.
For instance, right now it looks like we’re holding up near the highs and marking time sideways. There’s also a bit of rotation under the surface as buyers move between sectors. I think this kind of price action is healthy digestion. And right now, you can actually see the building blocks of trend taking shape.
Last week we were watching for SPY to find support at $280. That held with Wednesday’s hammer candle and now we’re back up near the highs. It would be great to see a higher high above $286 (especially on a closing basis). That strengthening uptrend would be one more near-term victory for bulls (even if takes us a while to get there if we go sideways for a few days).
On the other hand, if we saw a rapid push to new highs and then a violent reversal lower with selling across the board, I’d be much more worried. Unlike in February-through-April, there’s been a relatively calm exchange between buyers and sellers as they discover price the last month or two.
One more piece of bullish evidence lately is the action in some of the more speculative market sectors. And I’m not just talking about today’s bounce in emerging markets (although that helps too). Nope, instead it’s those pot stocks I want to talk about today.
Marijuana Stocks Looking Strong:
Up here in Canada, Marijuana stocks have been a huge boon to stock investors the last few years. I’ve had some greats trades in both individual securities like ACB.TO and WEED.TO, as well as the sector ETF, HMMJ.TO. In fact, I’m still holding positions in the latter two. But I finally think there are some American-listed names that are worth a look (CGC notwithstanding).
Okay… actually, let’s start with CGC because even though it’s gone up a lot already and had a relatively violent consolidation, it could be ready for another leg up. The fact that Constellation Brands recently invested $4B in CGC is also hard to see as bearish…
So overall, I’m feeling relatively bullish on the sector because the biggest pure-play company in the space is charging to new highs. No need to overthink it.
But moving on from the bigger stocks, another stock in the industry that’s looking pretty appealing to me is CRON. Here’s the weekly chart. It looks like it’s up a little bit in the premarket this morning too. So hopefully the momentum can keep moving:
Finally… if you prefer to buy the dip… one other stock to consider might be GWPH. It’s a pharmaceutical company with a cannabis derivative product. I don’t love the chart but I appreciate it might offer good risk reward with a relatively tight stop below the recent lows.
Plus, with the top-down sector support I think it could be worth a go. Here’s the weekly view as usual:
So personally, I’m still holding WEED.TO and the broad sector ETF HMMJ.TO. But I think these US stocks are starting to look interesting too. And I’ll be carefully watching CRON closely into the end of the week to see it if can keep the momentum up.
Now at the moment, I am fully invested so I don’t have any new buys for you. But I should have some new cash hitting my personal accounts later this week so I’ll be sure to keep you updated on any new moves in the portfolio. And with the markets coasting higher so far to start the week I don’t have any stops triggering either.
So let’s move on to some charts that are likely to be in play this morning…
Tuesday’s Charts Of The Day:
JKHY – Here’s one of my existing holdings that’s reporting earnings this morning. It’s been in a strong uptrend recently and I’m hoping it can keep moving. But it’s always a bit of a nail-biter to see how the market’s going to react to earnings news.
KEYS – This is another company ready to report numbers this morning. I don’t own any KEYS yet, but the consolidation is pretty impressive and with any luck this one could be in play for another leg higher after this most recent price digestion
URBN – Okay, I have a couple more earnings names. The reason I dwell on them so much is because they present the opportunity for market-moving information. And given the fundamental nature of these developments, they can attract big investors who take time to build position into names like this (thus driving trends). And since retail has been so strong lately, I think URBN is worth a look
SE – And now for something a little bit different. I don’t usually like to buy charts like this. But I wanted to share this one because of how clear support is. With earnings coming out any minute now there could be a chance to get in for a quick play. On the other hand, I would be quick to cut any losses given the prior selling we’ve seen (again, not my style but kind of an interesting chart I wanted to share because the bounces from support can be good for quick moves).
MDT – The longer-term view of Medtronic really has my attention. And after the company announced a beat on the top and bottom line, I’m curious if this one can keep building on prior strength to finally get moving again…
LULU – Earnings are out of the way on this one and the chart sure looks great. I’m already long LULU but happy to see it making a fresh breakout from consolidation up to new highs. With strength in retail overall (and NKE in particular), I like the odds for more continued upside
Now as always, here are a few thoughtful links to keep you thinking throughout the day.
“Market environment checklists are important because they define terms and provide details for when financial changes may occur.” Checklist For a Bear Market
“Based on how the Advance-Decline Line is calculated, which does not take into account the magnitude of daily changes in price of the underlying stocks, a lack of a bearish divergence in a single indicator is not necessarily reflective of a positive confirmation of an up trend.” What You Might Be Missing About Market Breadth
“Another Fall calendar reminder is that the U.S. elections are less than 80 days away. And, as we head into the elections, the U.S. economic data and sentiment surveys continue to dampen.” Someone Will Be Busy This Week…
“When it comes to honor we’re positively schizophrenic. On the one hand, we have deep nostalgia for the honorable way of life… But at the same time, we find many aspects of honor to be absurd, petty, and morally reprehensible.” Why Honor Matters
“And just like that the bull story on Tesla was broken. If you were long Tesla, you HAD to sell, whether or not it changed your personal beliefs or views about the stock.” Tesla Rekt
“I have read over 400 trading books over the past 15 years that have enabled me to pull life changing amounts of money out of the markets.” 10 Best Trading Books Of All Time
That’s all for today. Let’s see how things shake out at the close and I’ll be back at the same time tomorrow with another update for you.
For more commentary and ideas throughout the day, you can find me on StockTwits and Twitter sharing ideas. Any questions or ideas of your own? You can shoot me an email or comment below. Happy trading!