Mosaic Chart Alerts

How to use the stock market selloff to revamp your watchlist. Follow relative strength in CCRN, NRP, ENVX.

Sep 14, 2022

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

Tuesday’s massive plunge in the stock market is a stark reminder of the prevailing trading environment. With the S&P 500 losing over 4% and the Dow Jones Industrial Average dropping more than 1,200 points, this market remains difficult as liquidity is drained from the financial markets. That was affirmed with Tuesday’s larger than expected increase in consumer price inflation, which solidified expectations that the Fed will keep implementing outsized rate hikes while reducing the balance sheet. That puts a big spotlight on the central bank’s meeting next week.

But while the drop in the market feels scary, it’s also a blessing in many ways. That’s because it places the spotlight on stocks able to buck the trend and show relative strength, while also highlighting watchlist names that need to be removed. I was starting to get frustrated with the lack of follow thru from the watchlist, so this is a great opportunity to upgrade and add new names. As a result, there’s a lot of turnover on my list this week as I remove several stocks that continue to trade weak and are thus invalidating their setups. That includes HCCI, MERC, and CAL, where none of these stocks have triggered a trade. I’m adding several new stocks to both our long and short ideas.

Long Trade Setups

CCRN

Tested the $30 level numerous times since the start of the year. Trading just below that breakout level as MACD reset on most recent consolidation, which held above key moving averages as well.

NRP

A mineral properties LP stock that is testing the prior 52-week high at around the $50 level, which is my trigger. Also note big jump in volume last two weeks as the stock rebounded.

ENVX

Lithium battery producer that suffered a steep drop in stock price followed by a sharp recovery since July. Bull pennant pattern developing with $25 being my trigger level. This one is very speculative!

ERII

This one is holding just over the $25 breakout level. Want to see this stock hold over $25, and not fall back into the consolidation area.

DINO

Still trading in a consolidation pattern that I expect to test the $57 breakout level. Continues to hold key moving averages, but won’t give this stock much more time to complete its pattern.

PARR

Also consolidating below the $20 resistance level. That consolidation is now completing, so I would like to see price momentum pick back up to complete the pattern.

CVEO

Company provides accommodations to workers in natural resources. Broke below the ascending triangle going back to June. Keeping this one on watch for now since short-term moving averages were recently recaptured. Resistance is still the $31 level.

Short Trade Setups

Daily chart shows the importance of the $16 support level, which has been tested many times going back to 2021. MACD is recharged for another move lower.

CCL

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

UAL

Setting up a descending triangle continuation pattern. Still monitoring for a break below $35.

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

The Market Mosaic