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:
Major market indexes sold off hard on Wednesday and Thursday with the NASDAQ Composite Index dropping back below the 10,000 level on heavy Russell Index re-balancing volume Friday.
The S&P 500 Index broke back below its 200-dma on Friday on similarly heavy volume as decliners swamped advancers. It remains in a three-week correction off the early June peak in a divergence from the tech-heavy NASDAQ indexes which are by contrast merely in three-day corrections.
The Market Direction Model (MDM) remains on a BUY signal. With limitless liquidity providing a shallow floor, the question will be whether the number of cases of covid along with the fatality rate gets materially worse forcing further lockdowns. So far, there are conflicting indicators as the fatality rate is falling in some places while some of the new cases are potentially less threatening based on various reasonings.
Notable Action:
Big-stock NASDAQ names came under pressure this past week. Facebook (FB) and Alphabet (GOOG) were slammed on Friday with both closing below their 50-day moving averages on very heavy selling volume. Intel (INTC) has been in a downtrend since the early part of June and is now down to its 200-day moving average. It has been removed from the list. Netflix (NFLX) is failing on a recent breakout attempt. It held support at the 20-dema on Friday but is on the verge of a potentially full-blown later-stage base-failure.
Advanced Micro Devices (AMD) is coming apart after triggering as a short-sale/sell earlier in the week once it broke below its 50-dma. Cisco Systems (CSCO) bucked the sharply negative breadth on Friday to post a big-voliume pocket pivot off the confluence of its 10-day, 20-day exponential, 50-day, and 200-day moving averages. The move was perhaps fueled by news that the Trump administration is thinking about helping the company in 5G development. We're not sure what that means, however, and the move may be short-lived if the major market indexes continue to correct.
Everquote (EVER) broke below its 10-dma and 20-dema on Friday on heavy selling. The stock has obeyed the 20-dema for at least seven weeks so a violation of the 20-dema based on the Seven-Week Rule would indicate a sell signal. We first reported on the stock when it posted a big outside reversal to the upside on a typical undercut & rally (U&R) move and long entry signal as it came up through the lows of its prior base in late May.
Livongo Health (LVGO) posted a big-volume continuation pocket pivot off the 10-dma on Friday and is now extended from the line. It was first reported on when it posted a pocket pivot breakout which then quickly failed. Note, however, that the low-volume pullback into the 20-dema following the failed breakout was the best entry. We have found that an opportunistic approach is useful when set-ups seem to lose immediate momentum. In many cases these find their feet and turn higher; therefore looking to buy on weakness as a general approach offers greater optimality vs. chasing strength.
The principle is illustrated in both Fortinet (FTNT) and Lennar Corp. (LEN), stocks which we recently reported on when they posted pocket pivots. FTNT posted a pocket pivot on Monday of this past week but has gone nowhere as the stock has now drifted back below near-term support at its 10-dma and 20-dema. Note that the best entry would have been the most opportunistic two weeks ago when FTNT posted an undercut & rally (U&R) long entry signal at the prior May low. The U&R long entry set-ups is simple: once the stock undercuts a significant prior low in its pattern and rallies above it, the U&R entry is triggered using the prior low as a tight selling guide. LEN, on the other hand, in fact presented a short-sale entry when it rallied back up to the highs of a price range following its pocket pivot of two weeks ago. It is now drifting into no-man's land between the 20-dema and 200-dma as illustrates why chasing strength is never an optimal strategy in this market.
The Grayscale Bitcoin Trust (GBTC) continues to come down, dropping below its 200-dma on Friday. However, note that on Friday it undercut the May 11th low at 9.67 reaching an intraday low of 9.47 before closing at 9.70. This triggers a U&R long entry here using the prior 9.67 low as a selling guide. Because Bitcoin tends to be volatile, one may want to allow for 1-3% of porosity below the 9.67 low selling guide when determining their stop. Precious metals continue act well with gold making higher highs this week. Meanwhile, silver remains in a tight base with the Sprott Physical Silver Trust (PSLV) continuing to find support along its 10-dma and 20-dema.
The market may be telling a cautionary tale here as the indexes and many leading stocks come in off their recent highs. Review your selling guides, either those you have devised yourself or those based on the Seven-Week Rule, for example, and be ready to take action as appropriate if the market situation deteriorates beyond the 2-3 day sell-offs we have seen regularly, and from which the market has recovered regularly, since the lows of mid-March.