EB Daily Market Report - Wednesday, April 22, 2020
Executive Market Summary
- Futures were strong this morning as crude oil ($WTIC) moved higher after a volatile night of trading
- Restaurants ($DJUSRU) and semiconductors ($DJUSSC) are among leading industries after strong earnings from Chipotle (CMG), Texas Instruments (TXN), and Teradyne (TER)
- The Dow Jones is up roughly 450 points, while the NASDAQ leads our major indices on a percentage basis
- Gold (GLD) is very strong today, rising 2.5% to $1730 per ounce
- The 10 year treasury yield ($TNX) is up 4 basis points to 0.61%, aiding equities in general, and bolstering a bank ($DJUSBK) recovery attempt
- We have no active trade alerts at this time
Market Outlook
The short-term strength is welcome relief, but the first big test will simply be clearing the prior day's high:
Early strength is challenging short-term moving average resistance, while the two green arrows mark a recent price support level. From a bearish perspective, this could be a right shoulder in a topping head & shoulders pattern as well. Confirmation would take place on a fresh new low breaking neckline support. These patterns are bearish only upon confirmation, though, so respect a breakout to the upside.
Semiconductors ($DJUSSC, +4.26%) are rallying strongly after quarterly earnings reports from both TXN and TER showed EPS that beat consensus estimates. It was timely because the DJUSSC closed slightly beneath its 20 day EMA on Tuesday.
Trading Ideas
One thing I'm continuing to do each day is to watch to see how the Strong AD and Weak AD ChartLists are performing relative to one another. This is to ensure that Wall Street is continuing to accumulate stocks that have been leading on a relative basis since the February 19th top. We want to make sure current action validates trading those Strong AD stocks. I'm using the 3% gain (loss) level as a key metric. In other words, how many of the Strong AD ChartList stocks are gaining 3% today vs. losing 3% today. I'm going through the same exercise with the Weak AD ChartList stocks.
At 10:45am EST, here was the breakdown:
Strong AD ChartList: 68 stocks up 3% or more, 3 stocks down 3% or more
Weak AD ChartList: 49 stocks up 3% or more, 18 stocks down 3% or more
Advantage: Strong AD ChartList
At 12:00pm EST, the composition had changed slightly, favoring the Strong AD ChartList:
Strong AD ChartList: 102 stocks up 3% or more, 3 stocks down 3% or more
Weak AD ChartList: 56 stocks up 3% or more, 32 stocks down 3% or more
Today's action seems to be supporting our theory that we have much better odds trading stocks performing well, rather than trying to catch bottoms on those that are performing poorly.
Yesterday, on my StockCharts TV show, "Trading Places LIVE", I ended the show as I always do with "3 You Must See". I focused on 3 very weak performers - CNK, CC, VLO, all of which had declining AD lines and are included on our Weak AD ChartList. They all gapped up today, but are selling off, which is why they're on our Weak AD ChartList in the first place. Here's a quick update:
CNK:
The idea is to short stocks on the Weak AD ChartList if they open higher, because declining AD lines suggest a propensity to close below the open. In CNK's case today, it's now trading 7% below its opening price.
CC:
CC is down more than 3% since it opened at 10.51.
VLO:
At its intraday high, VLO was approaching key overhead price resistance. It's since backed quite a bit off that earlier high and is now down roughly 1.5% from its opening price.
Happy trading!
Tom