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

Following the S&P 500’s test and pullback from the 200-day moving average, I noted in this week’s Market Mosaic that stocks are at a critical junction. In past bear markets, including the dot-com bear and the Great Financial Crisis, rejections off the 200-day often led to new lows. But the bigger rally that started in mid-June has seen strong breadth thrusts along the way supporting the gains. So for the broader stock market, I don’t have a near-term directional bias and am still in wait and see mode. But I won’t hesitate to play setups that meet my fundamental and technical criteria! I’m still trailing several long positions, including DY that has continued to build on its gains. This week I’m removing HII from the watchlist following the stock’s rally out of the chart pattern I shared. I’m also removing AMGN until the stock starts to exhibit better relative strength. I still see plenty of setups in the energy space, which is where most of my long setups are focused. Some of our short setups are starting to trigger as well, like with WU and NIO. I’m keeping those names on the watchlist as price is still in close proximity to my trigger levels.

Long Trade Setups

DNOW

One of my favorite setups on the watchlist. Rallying off a test of the 50-day moving average and on the verge of breaking out from an ascending triangle going back to March 2021. Still using the $12 resistance level as my trigger.

DINO

Ideally this stock will spend a few days consolidating recent gains before setting up a test of the $57 breakout level (the weekly chart below shows this level the best).

PARR

Operates in the same refining space as DINO, and another setup where I would like to see a few days of consolidation before attacking the $20 resistance level.

CVEO

This company provides accommodations to workers in natural resources. Triangle pattern forming since June, with resistance at the $31 level.

GEF

Still not seeing great action following the move over $70. Will leave this stock on watch but a close below $70 (which is also the price level of my moving average stop) would point to a failed breakout and see GEF come off the list.

CAL

Keeping this one on the watchlist. Danced around the $30 breakout level before a sharp pullback today. Want to see support at $25 hold while momentum indicators reset for another move. Under $25 and this stock comes off the list.

Short Trade Setups

WDC

Pulling back to support levels as part of a head and shoulders downside continuation pattern. Still using $45 as my initial trigger.

NIO

Small breakdown below the $19 trigger level, now back testing that same level as resistance. For the setup to work, ideally the stock stays under $19 and takes out the $18 level next.

WU

Breaking down from a bear flag pattern with the move below the $16 level. The next area to watch is around the $15 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.