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

A couple weeks ago, I outlined my expectation that the S&P 500 could test its 200-day moving average. And that’s exactly what we got this week! What happens at this key level will say a lot about the stock market’s path over the near-term, and I’ll discuss that further in the next issue of The Market Mosaic. I want to focus on our trade setups here, and there are more breakouts still working for us. KNSL has made a nice move in a short amount of time, while GPC continues to build on its gains. ENPH and DY appear to be consolidating their gains while still trading above key short-term moving averages. EVH did trade under my moving average stop (see Rules of the Game below), triggering a sell for a loss. I’m removing JKS from our list of long setups, while adding a few names I’ve highlighted in recent issues of The Market Mosaic. I’m also adding WU to our list of short setups.  

Long Trade Setups

CAL

Recent addition to the watchlist. Still setting up for a breakout over $30, which is my trigger level. Long base that has been tightening its range since June, creating a bull flag pattern.

DINO

The weekly chart below shows the breakout potential in this refinery name. The trendline shows resistance at the $57 level that stretches all the way back to 2019.

PARR

Another name in the refining space, and is on the verge of taking out a key resistance level at $20 in the weekly chart below.

AMGN

Still keeping $260 as the level to watch here. Looking for a break above that resistance with this ascending triangle pattern that has been forming since last year. Modest signs in recent trading that momentum is starting to pick up.

DNOW

Still keeping this one on the watchlist. Lets see how it handles a test of the 50-day moving average. This stock has formed an ascending triangle going back to March 2021, while still trading below the $12 resistance level. I noted the possibility to see a pause before attempting to breakout, with the stock continuing to consolidate.

GEF

Recently breaking out, but want to see better liftoff out of the base as this stock is still trading around the $71 resistance level.

HII

Here’s the weekly chart below. Discussed this name in The Market Mosaic a couple weeks ago. Noted breakout from a symmetrical triangle pattern, and that I wanted to see a close above the $230 level. We’ve seen that move this week, which could open the door to the prior highs at $280.

Short Trade Setups

WDC

Potentially carving out a head and shoulders downside continuation pattern. I’ll be interested in this setup as long as the stock remains below the $50 level, with $45 being my initial trigger.

NIO

Keeping it simple – still watching for a close below $19 where I would expect a move back to $15.

WU

Early stages of breaking down from a bear flag pattern. Looking for follow through below the $16 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.