Mosaic Chart Alerts

Long & Short Trade Ideas

Welcome back to Mosaic Chart Alerts!

In this newsletter, I’ll focus on the best setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trade ideas.

And to select these ideas, a lot of work goes on behind the scenes to find stocks offering the right combination of fundamental attributes along with a proper chart setup.

These are my notes from a shortlist of setups I’m monitoring.

Weekly Recap

As expected, price action this week has been quite volatile as nearly half the market capitalization of the S&P 500 reports earnings as well as the Federal Reserve meeting. But that’s also creating a trading environment where both long and short setups can work. ENPH from last week’s Mosaic Chart Alerts is the standout, blasting through our breakout level following earnings (see Rules of the Game below for how I manage open positions). As a result, I’ll remove this one from our watchlist. GPC is also holding just above the breakout level I shared last week. EVH and DY are still trading constructively within their patterns. On the short side, nothing has triggered from our alerts just yet. KALU did dip below $70 on an intraday basis, but didn’t close below the breakout trigger. I’m removing that stock from the watchlist as the pattern is now invalidated.

Long Trade Setups

AMGN

New addition to this week’s watchlist. Showing a longer-term weekly chart with this stock to highlight importance of the $260 level. Looking for a break above that resistance with this ascending triangle pattern that has been forming since last year.

DY

Still eyeing a break above the $100 level discussed past two weeks. Small move above that level last week then reversed lower. Tested 50-day moving average now trying to break out yet again off a shorter-term ascending triangle that has developed as well.

EVH

Evolent Health (EVH) still on the verge of triggering a buy signal. As noted, this stock has been basing for a move since October; and ran back up to the $35 resistance level. Pulled back to the 50-day, which also reset the MACD. Recharging for a breakout move.

GPC

Breaking out of an ascending triangle pattern that’s taking the stock to new highs. As noted last week, resistance was at the $141 level which triggered the breakout. With the move completed, I will remove this stock from the watchlist next week.

HALO

Constructive action still holding above the 21-day moving average after touching resistance at $52, where a close above remains the breakout level I’m watching.

Short Trade Setups

HA

New to this week’s watchlist. Attempted to take out trendline support and rallied, but still trading below key moving averages. Watching for a close below $14 to trigger a short position. Pattern becomes invalidated on a move above trendline resistance.

U

Noted this textbook bear flag pattern in this week’s The Market Mosaic. Watching for a close below $32 to trigger a short position.

Rules of the Game

• If you haven’t noticed yet, I trade breakouts! I trade based on the daily chart for long positions. And for price triggers on long setups, I tend to wait until the last half hour of trading to add a position. I find that emotional money trades the open, and smart money trades the close. If it looks like a stock is breaking out, I don’t want a “head fake” in the morning followed by a pullback later in the day.

• Also for long positions, I use the 21-day exponential moving average (EMA) as a stop. If in the last half hour of trading it looks like a position will close under the 21-day EMA, I’m usually selling whether it’s to take a loss or book a profit.

• For short (or put) positions, I trade off a four-chart instead of a daily. Why? There’s a saying that stocks go up on an escalator and down on an elevator. Once a profitable trade starts to become oversold on the four-hour MACD, I start to take gains. Nothing like a short-covering rally to see your gains evaporate quickly, so I’m more proactive taking profits on short positions. I also use a 21-period EMA on the four-hour chart as a stop. If there is a close above the 21-period EMA, I will cover my short.

For updated charts, market analysis, and other trade ideas, give me a follow on twitter: @mosaicassetco

Disclaimer: these are not recommendations and just my thoughts and opinions…do your own due diligence! I may hold a position in the securities mentioned in this newsletter.