Stock of mention:
WAB putting on a nice handle and earnings are 3 days away. RS headed up.
APPF in tight pattern with RS moving higher. Earnings soon.
David Ryan 3-time investing champ was on the Thursday IBD podcast. Here are some notes. I was a good podcast and can be watched on YouTube or investors.com.
Reviewed NVDA stock. Recent sell-offs on high volume. Institutional selling. Attempted rally on weak volume. As it tried to get back to old highs on 7/10/24, the RS was lower, a bad sign. That is all telling you that maybe it is time to take profits, hedge the position or sell the entire position. David also looks at how long it took to recover vs go down. NVDA went down in 3 days and after 12 days of “recovery”, it was not yet back at highs before it failed again.
08:30 Looking at the Naz, it looks like an upside down rally chart. On 7/10 we put in a high, and then on 7/17 we had a high volume break-down on high volume. Just the opposite of a follow-thru-day on a rally. Plus that took us below the 21dma. And still extended from 50dma. David can see how we could easily come back to the 50dma, hopes it is not too fast. Also, after a downside reversal day, you want to see how the stock or index rallies back. The Naz was unable to set new highs.
The big IWM moves up indicate money is rotating. IWM could come back to the pivot area of $210 and still be ok.
We should watch gold, breaking out to new highs. “I have never seen gold make a huge move and the markets to well at the same time”
18:50 Review of historical NVDA runs. In early 2020 it had a good run and “got ahead of itself” and it consolidated for almost a year before starting another run. Drawing longer term trend lines lets you see when it has gone too far above the trend. Bill likes coming out of a base and go up fast with power. But when coming out of a late stage base or has been running awhile and then goes up too fast, that is a flag. Does not have to be a climatic move.
27:30 HWM: You can draw a trend line from $51 to $69 and then she is shoot up at a steep angle. Now it is consolidating but the chart is also “breaking” . Fell below 21dma on high volume and can’t get it back. Not saying it will roll over and die, but it needs to spend more time going sideways. People think that big move means it will quickly make a new big move, but it can take a long time to consolidate and stock is reset to go again
When stocks are so good and getting ahead of themselves, be prepared for taking profits or for waiting a while for it to consolidate.
In the market, you are always looking for change. An acceleration or breakdown is a change you need to think about.
Then ANTS indicator can also show when it is getting ahead of itself after a big move. (e.g. GBTC around March 2024)
34:00 Cirrus logic had been basing for a long time, then broke out and acquired ANTS on that breakout run, that portends more strength later, not a top.
When David thinks a stock is getting extended beyond its trend, he will start selling pieces. Maybe 10-15% at a time as it is going up. Once he is down to 50%, he will watch it, and if it starts turning down, he will sell more of it. He might keep a position that is small enough to let him ride through a new basing process.
Stocks To Watch: 39:30
Ollie’s: Looking to expand across country, at least double stores. Turning around and has had 4 good quarters of earnings. Better than their competitors. Had a good move after latest earnings and created a “flag” with a 3-weeks tight pattern - not giving up gains. Much better merchandise than Five Below.
One year after losing money, Dave decided to improve his discipline and stop chasing stocks. He would only buy cup with handle breakouts and he did much better.
45:00 Best Buy - looking at a replacement cycle from the 2020 PC buys and AI chips should help a refresh cycle. Look for it to set up a proper base. When looking at a turnaround stock, he wants to see institutional buying. For BBY, it had 5 or 6 high volume up days in a row after earnings. Turnarounds require you to depend a lot on the technicals of the stocks, but you need a couple quarters of good earnings first.
If you are in a hot sector our group like technology, watch for other sectors or groups starting to move. That indicates they are receiving money and that money could well be coming out of a hot area, thus signaling a top. For instance, look at long-term health care stocks like ENSG and PNTG. The built nice bases and good breakouts. The whole group was attracting money. Look at the earnings line on the weekly for ENSG. Watch the stock for a new base. SBRA.
