Daily Plan: Market Review & Focus List (12/29)
With Sector analysis, Leadership analysis & Personal Portfolio Updates as we head into the last trading day of the year!
Hi all! 👋
In this article I will cover:
General Market Overview
Sector Analysis - Which groups are breaking down vs showing relative strength
The action displayed by leading stocks with TML potential
A Personal Portfolio Update
Links to TradingView watchlists
A Review of today’s focus list
Stocks currently on my focus list with actionable trade ideas
General Market Overview
The overall market saw a strong move up with the indices closing as follows:
It is incredibly important, that as of right now, we see the market action for what it really is - a strong bounce from oversold conditions, more than likely fuelled by short covering.
Of course, can this change into a sustained uptrend?
100%.
However, for that to occur we would require much more positive feedback from the market - which as of right now just is not there, yet. The importance of keeping an open mind at all times cannot be overstated, do not stick to one opinion and allow bias to blind you - but rather understand the feedback the market is giving and interpret that day by day.
Today we saw stocks way off their highs such as FSLY 0.00%↑ and BYND 0.00%↑, which are down a whopping -94% from their highs, bounce strongly:
Now, was this because these are stocks that are setup with a great technical and fundamental background that institutions cannot wait to get their hands on these shares, or rather, is it due to the market undergoing severe distribution recently, closing at the lows yesterday, and so forcing lots of short-sellers to take some profits on their positions by covering (buying back the shares), which would fuel a sharp move upwards?
While nothing is certain - odds definitely point to the short-covering as being the fuel behind this move as I am seeing something similar to this from a few months ago:
This is not to take away from the possibility of this being the beginning of a tradable bounce - which one could take advantage of and experience a nice spike in equity over a relatively short time, as these bear market bounces tend to be short-lived and rapid. I am just trying to continue stressing the importance of patience as things stand, and if you are inclined to make any trades - taking profits when you have them is more than likely a viable strategy in this market environment.
The fact that new lows continue to outpace new highs at such an alarming rate is yet another factor clearly depicting this market environment.
It is very easy to get chopped up in such markets if you try and chase every little move, it is important to understand that the trend is still very much down, we are below all key moving averages on the indices and there are little to no quality setups in potential leaders as things stand.
The key is to continue carrying out our routines and look for a sustained change in market feedback, where there would be so many quality setups that we would be unsure which to buy!
In yesterday’s market review, I mentioned the potential TSLA 0.00%↑ had to bounce sharply due to the extreme distribution as of late and having its first positive close in almost 2 weeks! It followed up on that with a strong gap up and close up +8.08%, yet still below all key moving averages which continue to trend down while -70% off the highs:
As tomorrow is the last trading day of 2022, do not try force anything and be a hero, trading volume will likely be low and do not expect too much. Focus on closing off the year with a good mental state and push all your efforts into improving as much as possible over the next year as you enjoy the long weekend with the market being closed on Monday!
Wishing you all a Happy New Year, thank you for all your support! 🙏
Sector Analysis
The overall thrust in breadth that was seen by the action in the indices was further amplified by the action displayed by individual sectors:
This strength was emphasized by no sector that I track closing negative on the session, with the components listed above closing +2.33% on average.
The fact that the top 2 sectors for today, XITK 0.00%↑ and XWEB 0.00%↑, being the 2 from the above list that are furthest from their 52 week highs adds more conviction to this being an oversold bounce as a short-covering rally.
In contrast to this, the sectors closest to their 52 week highs were the ones that moved up the least, as can be seen by the bottom 4 in the above list - XLV 0.00%↑ XLE 0.00%↑ XLU 0.00%↑ XLP 0.00%↑
Weekly charts of top 2 and bottom 2 sectors performance today:
I am linking the sectors watchlist in tradingview for your convenience, here
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