Mosaic Chart Alerts

Pattern completes in NIO. Adding ERII 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

For the last couple weeks, I’ve been flagging oversold conditions in the stock market. And more recently, those conditions have become extreme so it’s not surprising to see a bounce unfold across the market today. If we can see a sustained rally, the quality and breadth behind the gains will say a lot about the next move in the stock market. It would also be a positive short-term signal if the S&P 500 can recapture the 4,000 level, which is also near the 50-day moving average. I will be very curious to see how those levels are handled in the short-term.

I’m also on breakout watch with stocks from our watchlist, which has become heavily titled toward value and energy names. Many stocks in the space are under pressure today following the pullback in oil and natural gas, but the setups remain constructive overall and I will wait for our levels to trigger. I do have one addition to our list of long setups with ERII, which put in a strong move today and is nudging above a breakout level. I’m also removing NIO from the short watchlist following a decisive move below the $18 level that I highlighted last week. I’m not adding any new positions to the short list for now.

Long Trade Setups

ERII

This one is breaking out today! My trigger level is $25 where price barely closed above, but volume is surging as well so I wanted to bring this to everyone’s attention. Lets see if it can stay above $25 the rest of the week.

HCCI

Recently ran up to the $35 resistance level where momentum became extended. Pullback still 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

Big base that 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. Ideally want to see the 21- and 50-day EMAs respected.

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 that’s respecting the 21-day EMA.

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. That consolidation is now completing, so I would like to see price momentum pick back up now.

CVEO

Company provides accommodations to workers in natural resources. Broke below the ascending triangle going back to June. Will remove this one from watch if short-term moving averages aren’t recaptured this week. Resistance is still the $31 level.

CAL

Keeping 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

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

UAL

Still watching the descending triangle continuation pattern. Looking for a break below $35, while a move over upper trendline resistance invalidates the pattern.

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-hour 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.