Mosaic Chart Alerts

Patterns complete in DNOW, WU, WDC. Adding HCCI, MERC, CCL, UAL to the watchlist.

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

Stocks have remained under pressure following Fed Chair Powell’s speech at Jackson Hole, where he squished any hopes of a dovish pivot in policy stance. Despite the negative headlines and price action, I noted how oversold conditions were starting to emerge in this week’s Market Mosaic. That’s especially the case now that we’ve seen further weakness in the S&P 500, but key support levels are also starting to give way. That includes the S&P’s 50-day moving average and the 4,000 price level.

I’m still not doing much this week with long setups, but this pause in energy stocks is allowing extended momentum to reset for another move higher. Broadly speaking, this is still where I see the best long setups. DNOW is one that triggered last week with a surge out of its base, so I’m removing that one from the list. I’m also taking GEF off the watchlist as the stock moved below the $70 level that I noted last week. Our short setups are starting to work with the market’s weakness, including the downside setups in WDC and WU. Since those have played out, I’ll remove them from our watchlist. Be sure to check out the new additions to this week’s long and short monitors.

Long Trade Setups

HCCI

New addition to the list. Recently ran up to the $35 resistance level where momentum become extended. Pullback so far respecting the 50-day moving average as the MACD resets. I expect this stock is recharging for a breakout over $35, which is my trigger level.

MERC

Another new addition to this list, although I’ve posted about this one before. Base extends back to May 2021 with $18 being the key level to watch. Pulling back after a recent test of that level, which is resetting momentum for another shot at a breakout.

DINO

Noted last week my preference for this stock to spend a few days consolidating recent gains before setting up a test of the $57 breakout level. That’s exactly what’s happening this week with a constructive pullback so far.

PARR

Similar to DINO, this is another setup where I would like to see a few days of consolidation before attacking the $20 resistance level.

CVEO

Company provides accommodations to workers in natural resources. Still trading within the ascending triangle since June, with resistance at the $31 level.

CAL

I’ll keep this one on the watchlist for another week. Danced around the $30 breakout level before pulling back to trendline resistance. Still watching support at $25, where a move below and this stock comes off the list.

Short Trade Setups

CCL

New addition this week. Carving out a bear flag pattern since end of June, where a move below $9 could see the downside accelerate.

UAL

Another new addition setting up a descending triangle continuation pattern. Trading just above support, where I’m looking for a break below $35.

NIO

Keeping this one on the watchlist. Small breakdown below the $19 trigger level, then rallied back into the pattern shown. For the setup to work, ideally takes out the $18 level.

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.