In this report we analyzed: LRCX, AMD, ROKU, ATOM, MDB, QCOM, DOCU

Lam Research (LRCX)

SummarySummary

• Lam broke-out and has held above the upper breakout target around $282.
• The internal indicators are either weak or overbought, which supports the potential for a false breakout.
• We went long on Friday and put a stop just under $259 (closing price).

Key Price Levels to WatchKey Price Levels to Watch

• First support: $282
• Key Support for continued uptrend: $265 (don’t want to break below here).
• Key Resistance: $309 (above here is bullish).

Lam is a position we have been tracking. The structure of the stock appeared weak, and suggested that the ascending triangle pattern would give to the downside. However, last week, LRCX broke to the upside and held for 3 days. In fact, last Friday it gapped up and held just below the $309 resistance, which is a key level LRCX has to take back going forward.

My concern is the possibility for a false breakout. The internals are not supporting a sustained move. The MFI is in overbought territory as well as the CCI. The MACD histogram is showing a divergence from price, suggesting that the momentum is fading.

Also, the Accumulation/Distribution Line (A/D) is a key leading indicator that helps us gauge what the pros are doing. When it’s making new highs ahead of price, usually, price follows. It’s staying subdued, not reaching a new level while price does, which is not what we want to see.  

These indicators help mold our probabilities of making a good trade. However, no indicator is more important than price. Because the indicators are relatively weak, we will use a stop on LAM for this trade with a close below $265. This is a stock we want to own, so if we do get stopped out, we will look for the next setup.

AMD (AMD)

SummarySummary

• AMD has been in a consolidation pattern since April, sandwiched between the 55-day EMA (in red) around $51.50 and the downward sloping trendline in blue.
• The internal indicators are strong, and suggest a resolution to the upside.
• We are placing a stop at $47.40 (closing price).

Key Price Levels to WatchKey Price Levels to Watch

• 55-Day EMA is the first support: $51 – $52
• Below that is $47.75
• Then the blue upward sloping trendline that started in 2016 (below here and things get bad).
• A break above $57 is bullish.
• A break above $61 is very bullish.

This is a stock we want to own for a long time and we are starting that process now. We picked up shares of AMD from a technical perspective for a few reasons. For one, the 55-day EMA (in red), has been solid support for AMD in the recent uptrend. The price is getting bought each time it approaches this level. Furthermore, note how the selling volume is decreasing, suggesting that the sellers are drying up.

The Accumulation/distribution line (A/C) and the CMF, which are fantastic leading indicators, are suggesting that money is flowing into the stock. The MACD is in a classic coiling position, which is when it rises at a 45-degree angle after an uptrend, then settles above the 0 line in a predominantly horizontal fashion. We typically see this before a breakout.

Once again, these indicators help our probability of a making a good trade that can potentially turn into a great buy and hold. AMD is approaching a key inflection point. The 55-day EMA is just below it, and below that is a trend line that AMD has respected since 2016.

Above the current price is the confirmation of cup & handle pattern that began forming at the March high. We will know soon what AMD will decide and we thought it was worth a chance that we get a resolution to the upside.

We will place a stop at $47.45 (closing price). We do not want to be in this stock just before the 4-year trendline breaks, so we will protect ourselves with the stop just in case.

Roku (ROKU)

SummarySummary

• Roku is following our outlined plan perfectly, so far.
• We are targeting sub-$100 and above the $79 region for shares.
• The structure suggests that after the stock bottoms in this retrace, we should be on a path to new highs.

Key Price Levels to WatchKey Price Levels to Watch

• Below $102 and we will look to add at key supports $96, $89, $86, $79
• Below $79 and things get complicated.
• A break above $125 and things get very bullish.

Roku is beginning to fall out of favor with the public. This will be the 3rd time since we began trading Roku in 2017 that sentiment has shifted away from Roku, and this will be the 3rd time that we accumulate shares during weakness.

We have covered demand drying up with ad tech in a global deflationary environment. Ads are usually one of the first items to go when a company needs to tighten its operating expenses. We believe Roku will make It through this process. Because of this, we are comfortable acquiring shares of this stock without a stop due to our time horizon being 5+ years.

I have written extensively about Roku’s long term price structure. I believe we are in the middle of a B-wave retrace that should take us sub-$100 to $79. This is a large price range, but we will look to be buyers within this region once we get signs of bottoming.

The internals are all weak and hanging right above support. Once these supports break, we could get a sharp move down. The MFI is showing positive divergence, which is usually a sign of an impending reversal. If this plays out, I will view it as the b-wave within the larger B-wave, and it should halt below the upper trend line on the chart before reversing to the C-wave down.

If Roku breaks above this trendline as well as the 200-Day SMA, which is around $125, we will look to add into strength. If Roku breaks down further into our target region, we will look to add into weakness slowly.

Atomera (ATOM)

SummarySummary

• ATOM is completing a corrective (A,B,C) uptrend.
• It can extend if we break above $10.
• The internal indicators are all diverging, suggesting a pullback.

Key Price Levels to WatchKey Price Levels to Watch

• Above $10 and we can extend the uptrend.
• Below $7.80 and the green target box comes into play.

Atomera is a small cap that needs one or two deals in the pipeline to close in order to be a viable product. Initiating once a deal is announced may leave some gains on the table, but this scenario also carries less risk.

The structure appears to be tracing an A,B,C uptrend, which is close to completion. This has kept us on the sidelines for now. Also, notice the trend of the indictors from the March low compared to the trend in price. Note how they were in lockstep, increasing with price. Then, at different times, the indicators began trending down as price continued up. These divergences are also suggesting that price is close to topping.

Furthermore, on Friday, we got a bearish engulfing candlestick pattern, which usually precedes some level of correction. If we do break down below $7.80, my targets are in the green box. These targets are based off of Fibonacci ratios and common targets for a pullback following a C-wave uptrend.

However, ATOM still hasn’t broken its 8-day EMA (in green). So, even with divergences showing and the structure suggesting a pullback, it can still extend further to higher levels. If we do get a break above $10, we could easily extend to $10.35, $11.50, $13.50 before getting a notable pullback. We will keep updating you with any changes.

Mongo DB (MDB)

SummarySummary

• It appears that MDB is in a 4th wave consolidation.
• We will use the outlined supports coupled with the RSI hitting the 40-35 region for an entry.
• We will look to go long with a relatively wider stop just in case we get a break below $144.50.
• As long as the $144.50 holds, we expect the final 5th wave to take us to new highs.

Key Price Levels to WatchKey Price Levels to Watch

• Supports levels for a likely bottom of a 4th wave:  55-Day EMA + $185 (likely target), $170, $155.
• Key support for a continued uptrend: $144.50

The price structure suggests that we just completed the 3rd wave off the March low. The standard retraces for a 4th wave pull back is in the green target box, ranging between $185-$155.

There has been a sharp trend change as noted by the MACD cross over as well as Friday’s price gapping down below the 20-day EMA in blue. I would look the 55-day EMA in red as support, which will coincide with the 38.2% retrace level of the entire 3rd wave for a potential buy.

If we do go long, we will place a stop just under the 1st wave at $144.80 (closing price). Below this level and things get complicated. However, as long as this level holds, we project new highs for the 5th wave completion.

Another clue will be the RSI. The green line indicates a likely bottom for price, which is around $40-$35.

Qualcomm (QCOM)

SummarySummary

• QCOM had a strong breakout in price with mixed internals supporting the move.
• If this is a 5-wave move off the lows, we should see a healthy pullback in a 4th wave consolidation between $82-$76.
• Below $72 is bad.
• Above $98 is really good.

Price Levels to WatchPrice Levels to Watch

• Support levels for possible 4th wave bottom: $83, $97, $76.
• Key support for a continued uptrend: $72.
• 5th wave top (projected): $95 region.
• Multi-decade resistance zone: $93-$98.

Qualcomm is a 5G play on the semi-conductor side of the equation. This is a well-known thesis, which has accounted for the stock’s rise in price over the years. We have moved away from it as a 5G play and instead put our allocation for this trend into Marvell, Boingo, Inseego. However, Qualcomm is a solid company that we have been tracking for an entry.

It’s worth noting for anyone watching this stock that we have a clear breakout. The 200-day SMA (in black) has kept this stock in check until recently. Note the strong break above the black moving average, which is the 200-Day. Furthermore, QCOM closed the downward gap from March by gapping up above it. This is also a strong sign that should be encouraging to anyone long QCOM.

The internals are mixed, so price is king for now. The structure suggests that QCOM is completing or will soon complete a 3rd wave off the March lows. There should be a retrace, assuming price has topped on Friday into the green target box between $83-$76.

A break below $72 complicates the picture. Furthermore, QCOM has a lot of work to do overhead. The red band highlights a resistance region that has halted QCOM going back decades (yes, decades). This will be a tough challenge for QCOM to overcome; however, a break above $98 and we could see the price really take off.

Docusign (DOCU)

SummarySummary

• DOCU is tracing a large degree leading diagonal pattern.
• It is due for a 4th wave consolidation.
• The internals are fading and price has reached the upper end of the channel.
• The $112-$107 region is a likely target. However, $126 would be a shallow consolidation while $94 would be a deep one.
• Above the recent high, and DOCU can continue to extend to higher levels, which would change the targets for a pullback.

Key Price Levels to WatchKey Price Levels to Watch

• Above $153 and DOCU can extend to higher levels: $162 and $173 will be resistance levels to watch.
• A break below $126 and the $112-$107 region will be a reasonable target.
• Below $107 and $94 comes into play.

The above chart shows the weekly candlesticks of Docusign since it went public. The weekly trend cuts through a lot of the daily/hourly noise to help gauge what’s really going on. The color of the bars are based off a momentum indicator I like to use on weekly charts: red indicating a period of weakness, blue being neutral and green being a notable uptrend. The lack of red bars is what’s intriguing. Docusign is an incredibly strong stock right now, and as long as their growth remains intact, this trend should continue.

Like many high-flying stocks, its structure is tracking a leading diagonal, which we’ve talked about several times in relation to other stocks, like Roku, for example. This pattern is a 5-wave pattern that tracks a trend channel. Each wave is comprised of an internal 3-wave pattern.

This would put DOCU at the peak of its 3rd wave. We will look to pick up shares on the 4th wave pullback.

Now, if we zoom in to the daily chart, we can get a more granular idea of what price is doing. The internals are all diverging from price, suggesting that the momentum is fading.

DOCU has broken its 8-day EMA in green and found strong support on the 20-day EMA in blue. A break below $126 will confirm a likely top for the 3rd wave, and we will watch for the target areas for entry. A shallow B-wave correction would be between $126-$112. A deep B-wave would be between $110-$94. However, there is a notable cluster of Fibonacci levels between the $112-$107 region.

Broad Market Levels

The broad market is currently range bound between 2900 and 2700. The last couple of weeks has been a notable back and forth between the bulls and bears in an attempt to breakthrough this range. From a purely technical perspective, this is what I’d want to see before saying which way this will go:

• For a bullish trend to resume, I want to see the S&P 500 break above 2950 and then finally 3150 for me to believe that we are in a new bull market. If this is the case, that will likely be the end of 1 of 5 large degree waves off the March low. So, I will look to add to my longs in the wave-2 drawdown, which I see taking us back to the 2800-2600.

Wealth is built in bull market, and if this scenario plays out, we will likely have several years of an uptrend to profit from.

• For the bears, they will need to break below 2630 for me to believe that what we have witnessed over the last month was in fact a bear market rally. If this is the case, my initial target will be between 2250 – 2050. If 2050 breaks, expect a prolonged bear market.

If 2630 is broken, expect tech to be the leaders down this time around. There has been an extraordinary concentration of new assets both directly from retail as well as in passive strategies in tech, which has made the top 6 mega-cap tech names account for over 20% of the S&P 500. With such narrow leadership, the direction of these names will lead the market. As of now, we are positioned for both scenarios.

The below chart offers a visual of the above outlook

Stock Updates

Roku (ROKU)

The above chart shows the long-term structure of Roku since its IPO. It has clearly been trading in a larger degree “leading diagonal” pattern. This pattern is a 5-wave pattern that travels within a trend channel (in gray). Furthermore, each of the 5 waves has an internal structure of 3-waves (A, B, C).

With Roku’s fall in March, it tagged the bottom of the lower channel, and began a 3-wave move up. Once it broke above the 200-day SMA (in red), the probability shifted that the low is in for Roku.

If this is true, it should give way to a B-wave correction back to the $102-$86 region. If the correction holds above this region, and begins a 5-wave pattern up, it is likely that we will no longer see this price range again with Roku. However, if Roku breaks below the $86 region, we will retest the lower end of the gray trend channel and possibly the lows from March.

This chart shows a close-up of where we are. The price is currently at an inflection point. It’s trading at the 200-day SMA, bouncing below a trend line and also trading between key Fibonacci price clusters.

If Roku can break above this region with heavy volume, I’d consider it a buy with a stop just below the $120 region. However, the internals are suggesting that the momentum is weakening while at this key level. I will look to add to Roku on the next pullback if it can hold the blue price box between $102-$86.

One final note – the Accumulation/Distribution line tracks, loosely, what “smart money” is doing. In other words, it factors in the closing price vs. the highs, assuming that the smart money makes allocations in the final hour of trading. As Roku’s price collapsed, notice how the Accumulation/Distribution line held up. The $102-$86 price region seems to be an area that smart money is accumulating, so it should act as strong support.  

Slack (WORK)

Slack is forming a head and shoulders pattern as it continues to attempt a breakout above $30.50. However, until this is confirmed with a breakout on heavy volume, the pressure is still down.

The above structure is suggesting that two scenarios could be playing out:

Red count: WORK is stopping out in a B-wave, and about to give way to the final C-wave down, which should take us to the $17-$14 region. I will want to see the RSI break below 35 and price break below the $19.50 region with force, before making this scenario the most probable. Regardless, we consider Slack within this target zone a buy and hold for many years to come.

Green count: This count has Slack pulling back to the $24-$20 region, holding and then breaking through the $31.50 region to confirm the head and shoulders pattern. If this is confirmed, Slack will be in a larger degree wave-3, which I will target between $60-$70 before completing. We will want to see the RSI break above the 50 line to suggest this scenario is in play.

As of now, if the green count is active, we are in a wave-2, which could be shallow like Zoom’s wave 2 before breaking out over $70. So, if you want to go long, a good stop would be under the $19.50 region. If price closes below $19.50, the red count is in play.

Zoom (ZM)

Zoom has clearly bottomed in its wave-4 and is actively in the final 5th wave (in blue).

Considering this 5-wave impulse has been a textbook impulse, I’m expecting the 5th wave to top out between $195-$225.

We’re starting to see some divergences in the MACD histogram, which is very common in the 5th wave. The MFI, on the other hand, still has room to go and is not showing overbought conditions yet. So, even though we have enough in place for the final 5th wave to be complete, I think it’s likely we tag at least the $195 region.

This will complete the large degree wave 1, and give way to a large degree 2nd wave pullback, which I believe should hold the $100 region. We are now holding our position with no stops.

Datadog (DDOG)

Our trade, so far in Datadog is up about 20%. The structure of DDOG is suggesting that we are in a corrective, larger degree B-wave (in green on the chart). If the price can break above $44.50 on heavy volume, I will be leaning towards the low being in for DDOG and scrap the B-wave count for a more bullish one.

The momentum in the MACD histogram is weakening as price increases. It will be difficult for Datadog to break this resistance on the current attempt with weak momentum. The RSI is also showing a clear trend in green. If this trend fails, and falls below 39, we will likely hit the $37 region.

If price breaks below the $37 region, the green box will be in play, and we will look to add to our position between the $32-$22 region.

Okta (OKTA)

Okta’s price has broken out to new highs. However, we have not initiated on this move. The reason being is that the internal indicators are suggesting a false breakout.

The divergence in the MFI, and MACD are quite large. These 2 indicators act as leading indicators for price on the hourly chart. Also, the volume is not increasing with price, so there is low participation at current prices.  I’m expecting price to either retest the $146 region, hold and then move up with more healthy internals, or it will breakdown, beginning a new downtrend.

If price breaks below $138, the green target boxes will be in play.

We have Okta as a high conviction play, so we will not be too picky with the price we get. However, we do believe that a breakout is premature right now.

Inseego (INSG)

Inseego has had a tremendous run off the March low. The March low tagged the lower level of the wave 4 target we were tracking prior to the sell-off in prior market updates. It has now moved rapidly into the final 5th wave. I can see this 5th wave topping anywhere between $14-$23 before we see the larger degree wave-2 pullback. This pullback should respect the March lows when it plays out.

Dynatrace (DT)

Our position in Dynatrace is currently up 25%. Like Datadog, DT is moving in a clearly corrective pattern. The internals on the hourly chart are diverging sharply as it approaches the $30 resistance region.  If DT breaks below the $23.20 support in red, the (C) wave target boxes will be in play.

On the other hand, if DT can close above $34 with heavy volume, it will signal that the bottom is likely in for this stock. As of now, we are holding our position without a stop, and will look to add in strength or weakness.

Shopify (SHOP)

Shopify is in an interesting position. After falling back to the $296-$280 support zone in March, a region that has held 3 major tests over the last year, it has moved in what appears to be a clear corrective uptrend – i.e., 3-waves and overlapping. However, a 3-wave pattern can turn into a 5-wave pattern, especially when the 3-wave tags the 161.8% extension of wave-1, like Shopify has done. So, to keep it simple, there are two scenarios I see playing out:

Green count: SHOP pulls back to $517-$460 region and holds. It will then move up in a 5-wave pattern to new highs. If this happens, we will be in a renewed 5-wave uptrend, and it will signal that the lows will likely be in.

Red count: if Shop breaks down below the $460 region and holds below this price. Then the prior uptrend to new highs was a very large B-wave, and the C-wave should take down to the prior target box.

The internals on the hourly chart are suggesting weakness, so we should know what count we are in within the next week or two.

Lyft (LYFT)

There is nothing encouraging about Lyft’s chart if you are long. Each up move in the 3-leg uptrend off the bottom is clearly corrective – i.e., overlapping and 3 waves. 

The internals are mixed. For one, the MACD is forming a coiling pattern, which is typically what we see prior to a breakout. It’s building strength for a move up. It’s not always a bullish pattern, but it’s worth noting. The MACD histogram is showing a notable divergence with price. Each time price makes a new highs, it’s doing so with less force.

I see the $33 resistance as the main resistance overhead, and it will also be where we are placing a reduced stop. We’ve made a combined 70% in our two Lyft shorts, so far, and I want to protect those gains. The easy money in shorting is over, so if we get stopped out with a small loss, we will look to reload at higher levels or when the downtrend commences.

Snap (SNAP)

Our short in Snap is currently down about 15% as we speak. We are early to what we believe will be a reset of the ad-tech market’s valuations, but we do believe this will play out. Snap traded just below our stop and then began to trade down. If our stop is triggered, we will close this position and look to reload with further confirmation. I will want to see Snap close above $17.50 before stopping out the following day.

What’s interesting is the symmetry of Snap’s move up. Corrections are counter moves in a larger trend. What we know about corrections is that they tend to be symmetrical in nature, and move in a 3-wave with overlapping pattern. Look at the 3-wave move in Snap’s move off the low. The first leg went up 58.8%. The 3rd leg, or final move up, went up 58%. It doesn’t get more symmetrical than this.

The same trading plan is in place as we last outlined. But, we believe it is likely Snap has topped, and the final C-wave down has just begun.

Last week, we stated that our primary count suggests that we have completed or are about to complete a 3rd wave down within a 5-wave structure, known as a C-wave. This week, the count has not changed; it is still valid and still in play.

As part of the 5-wave structure, we stated, “this will give way to a 4th wave corrective bounce,” which I believe we are in right now.

The below chart outlines this plan in blue. Regarding the corrective bounce, went on to say that “the structure of the upcoming bounce will be crucial for providing further clues as to the on-going direction of the market. If the correction is overlapping and symmetrical, it will support the 4th wave thesis.

 I’m expecting this to find resistance around the 2500-2600 before topping out. However, if we see heavy volume and a structure that is impulsive – i.e., 5-wave patterns – then it will support the thesis of a potential bottom. I want to see the 2750 level taken back before I will believe the bulls are in control.” 

So far, the market has met resistance and appears to be topping out exactly where we suggested it would – between 2500 – 2600.

As of now, my plan has not changed. I expect us the retest the lows and to slightly make newer lows. In the coming days/weeks, I will look for entries in this bear market between the 2250 – 2060 region.

Why I’m Cautious

That being said, I do want discuss why I’m hesitant to dive into equities this last week. One reason is that the 1800 range in SPX is still in play. It is represented by the red box, and would be an extended 5th wave drawdown. If the market breaks the 2065/2050 region with force, it becomes probable that we see this target.

If this count comes into play, the idea of a quick recession, which can see us at new highs by the year end becomes unlikely. Instead, the signals would indicate the potential for a more prolonged recession. As an investor, with this potential on the table, I am remaining cautious with my excess cash, until proven otherwise.

On the other hand, if we do bottom within the blue target range, which I am still expecting, I believe we could see the final 5th wave off the 2009 lows, which I have been talking about in many prior market updates. The target for this will be a multi-year bull market could take us beyond the initial 4000 target before we encounter a prolonged bear market. This is based on Elliott Wave theory, which I use to remove emotions from major market moves and to set up game plans.

On a fundamental level, if we see the economy open back up sooner rather than later and a potential vaccine or antiviral helps reduce spread, then we will likely see a sharp reversal in equities. Also, it can’t be overstated the record levels of liquidity dumped into the market by the Fed, which with improved sentiment and economic numbers, could create the environment for this renewed bull scenario to play out. This is also why I am hesitant to speculate on a bottom. If this plays out, the multi-year bull market, fueled by excess liquidity will more than make up for being late rather than early.

Further evidence we are in a 4th wave:

 Fourth waves are notorious for complex and confusing structures. The structure of what the 4th wave is presenting us is not different. It can be counted as a 5-waves up pattern off the low, which is typically bullish. However, at a closer look, it appears to be a more symmetrical, complex A,B,C pattern. Because of this ambiguity, I tend to turn towards other clues that can help verify our thesis.

Negative RSI Reversal

The negative RSI reversal pattern is when the price is making a lower high, as represented by the red arrow on the chart, and the RSI (and/or MACD) is making a higher high, as represented by the green arrows on the chart.

We clearly have this pattern playing on the daily chart. It suggests that the momentum under the price is fading. In other words, it is taking more buying pressure to make lower highs. This is not a good sign, and suggests a reversal is soon to occur.

Volume Patterns

Price can rise on weak volume, but in a true bottom and reversal, it is usually met with massive buying pressure, which shows up in very large volume spikes.

This volume, typical increases its trend as the uptrend returns. This is not what we are seeing today. In fact, the volume trend is decreasing and the only daily volume spikes are red.

Volatility

The above chart compares the S&P 500, in blue, to the rolling 20-day realized volatility, in yellow, and the VIX, in orange. The VIX measures the implied or expected volatility in the S&P 500 over the next 30 days. When it is high, it means that based on the options market, there is an expectation for elevated levels of movement (up or down) over the next 30 days.

Realized Volatility is a topic in and of itself; however, in essence, it’s the actual measurement of historical volatility over a given time period. I used the 20-day measurement to provide us with a visible trend.

You’ll notice that the realized volatility peaks after the market bottoms whenever volatility hits. It then rolls into a recovery. Now, look at where we are. We have yet to suggest a peak, let alone a roll. Nearly every time, when the market has bottomed, we’d see this measurement already rolling.

The VIX is also at an extremely high reading. Anything above 30 has historically been considered high, and a warning to investors. Above 50 is typically considered extreme, and suggests speculation for anyone trying to initiate long term buy and hold positions.

Today we are above 60, and in an uncanny fashion, have stayed above 50 for one of the longest periods on record. This is not normal, and until the VIX can begin to settle at lower levels, it is unlikely that we find a meaningful bottom.

Bear Market Rallies

On Tuesday, the Dow gained 11.5% in a single day from extremely oversold conditions. This move was followed by two additional days of gains, inciting the FOMO crowd to think the bottom was in. The financial news media fanned this feeling by announcing that this was the fourth largest single day percentage gain in the Dow’s history.

What they failed to mention was the context in which the greatest single percentages occur:

The chart shows the greatest single day moves going back to the 20s. The one thing they all have in common is they occurred within major downtrends in a bear market. A week prior, Marketwatch put out an article that outlined the number of > 5% rallies and > 10% rallies within the past bear markets, like in 1973 and 2008, as well as deep corrections, like 2012 and 2016.

The results are shocking. Large swings are common when both realized and implied volatility are high. However, until the market breaks its bear market downtrend, coupled with additional indicators, these moves should be treated like small gains in a larger downward trend.

Our Goal

We believe that the best gains come from holding great companies involved in significant tech trends for an extended period. One of the benefits of deep and thorough knowledge about these trends and companies is that the analysis allows you to hold these companies for the long-term with conviction.

This conviction is the key ingredient, and one of the greatest values we believe this service offers. Most tech stocks are volatile, and can have multiple +50% drawdowns on the long road to becoming multi-baggers. We use technical analysis to simply manage this risk and seek out favorable entries.

Please keep in mind that with the right price, our plan is to hold without stops, hedge and add in weakness, and only sell when the story changes. We are excited about the prices we are starting to see, and are looking to make long-term allocations in this market when one of two things occurs:

(1) Prices get so low that we are OK with any remaining downside in the bear market. The targets that I outlined focus on these prices. In bear markets, we get a flush of sentiment and a rejection of hope that stocks will ever recover again.

Anyone who invested during the 2002 and 2009 bottom knows the feeling. This simply has not happened, which means that either this bear market is an anomaly, and new highs are in our near future, or that we have more of volatility in our future that will ultimately flush out the remaining sentiment.

(2) The economy corrects, providing encouraging data that a real expansion can occur. In this case, the bull market will be in its infancy and prices will be higher than they are at the bottom; however, there will be an element of safety with higher probabilities that the market will continue to grow with a new expansion of the business cycle.

It can’t be stated enough that bull markets create wealth, not bear markets. The primary focus of most legendary money managers is to conserve assets. It is much more difficult to rebuild than it is to preserve and deploy into safety. In other words, losses work geometrically against you. For example, and asset that goes down 50% will require a 100% gain to break even. If an asset goes down 80%, it requires a 400% gain to break even. We posted about this on the forum in regards to Boeing.

The advantage of protecting gains is why we spoke regularly about how our focus was to ride the remaining momentum of the bull market with reasonable stops to protect us from the downside. If you followed our stops and entries that we outlined in real time on the forum, as well as on the market updates, you should be sitting on nice gains and minimal losses.

We take our subscribers and your readership very seriously, and lean towards being conservative instead of reckless. Hence, the S&P 500 levels we are watching tend to be in the middle rather than within an extreme on either side.

Amazon, Facebook, and Google experienced multiple large drawdowns and required both conviction and risk management. This is what we hope to impart through our own strategies of using stops and proper position sizing. We do believe that we are in an environment that has the potential to offer us fantastic values for leaders in the next tech cycle.

Stock Updates

Nvidia (NVDA)

Nvidia, unlike many of the tech names we cover, does not appear to be in a fourth wave correction. It appears to be in a larger degree A,B,C structure. This is supported by the structure of the decline as well as the symmetry.

On the B-wave, noted in pink, the (a) wave is the same length as the (c) wave. While price is struggling to break out at this key level, the internals are weakening, suggesting another leg down.

The yellow band is the primary support in play. Below this level, and we could see a rather large suck out. With that said, I’ve raised my target to the lower end of the yellow band at $173.

Roku (ROKU)

Stepping back from Roku, it is clearly trading as a large degree ending diagonal – five sets of 3-wave patterns within a trend channel. When Roku hit its low, it tagged the lower end of the channel, which is enough to meet the 3-wave move down. This makes up the 4th wave in this pattern.

This means that we will either get a spill over on the next retest, of we are setting up for a 5-wave impulse into the final 5th wave pattern. The internals and volume are weak, which supports a retest. Regardless, I’ve raised my target to $70, which will account for both scenarios. We will likely add in increments in case Roku breaks down out of this pattern prematurely.

Shopify (SHOP)

I’ve also raised my target for Shopify to $285. Shopify, like Nvidia, is trading in a larger degree A,B,C pattern, which will put us in the early C-wave down.

These moves are typically symmetrical, which would target the $245 region. However, I can’t rule out that the retest of the lows may hold, which would set us up for a 5-wave move to new highs. For this reason, I’ve raised the upper range of the price target to $285. Like with Roku, we will likely layer slowly into a new position at these levels

Slack (WORK)

Slack is also in a corrective pattern. I believe it’s in an A,B,C pattern and not its final 4th wave down. This means, like with Nvidia and Shopify, we should see a C-wave down into the green target box. The volume and internals are suggesting the same. We’ve raised our target to the $17 range, and will look to add to our position around these levels.

Uber (UBER)

We closed our short on Uber for a nice gain last week, as stated. It has rallied on weak volume and weak internal momentum, which is suggesting another bout of price fatigue.

There are two scenarios at play: (1) we are in a fourth wave, which will take us back to the lows; (2) we are in an A,B,C pattern. In which case, we completed the A wave, and are in the process of topping out in the B-wave. If this is correct, the C-wave is projected to take us beyond the recent lows.

Above $35 should be a stop for anyone who wants to speculate another round of weakness for Uber. We announced on the forum that we purchased puts in both Uber and Lyft on this strength, which are dated through May.

Over the week, we moved away from providing broad market analysis and focused more on providing updated target entries for our shopping list of stocks. Please reference the Top Stocks List under the spreadsheet section of the site, as well as the forum for updated charts.

If you are new to the site, a few places to start in regards to the information below:

Blog Update on Target Entries

S&P 500 Levels We Are Targeting

Fundamental Analysis and Convictions

So far, we have updated entries for 16 names and plan to provide the remainder in the week ahead.

As of today, we are still holding onto our long-term positions in Microsoft, Alibaba, Nvidia and Roku. We are also holding our position in Zoom, which we are now holding without a stop, and just began building a small position in Slack when it traded in the $16 range (updated on the forum).

Our shorts, Uber and Lyft, traded above the 8-day EMA on Friday. they both closed the day below the 8-day EMA, so it was an intra-day move. However, as a discipline, I always, without question, follow my exit plan when I set it. Since the exit plan was to sell when the 8-day EMA was breached, I will buy to cover these positions on Monday for 2 really nice gains. As of the close on Friday, we are sitting on a 38% gain in Lyft and a 29% gain in Uber, which have acted as fantastic hedges for our long positions.

I believe the extreme gains we saw in these two positions over the last 2 days were simply short covering. Both these positions have very high short interest, which can make for violent corrective moves up when the shorts cover. We believe there is more downside to be had in both these positions, so we will look to add in any further corrective moves.

With shorts especially, we always follow exit plans as any gain in a short can turn into a loss very quickly.

With a long-term-time frame in mind, we have a very positive outlook. This is the type of market that you build lifetime positions with cost basis we will may not see again. However, our personal opinion and preference is to wait for our target entries and target SP 500 levels because we believe there is more downside in our future. The evidence for this opinion and belief is laid out below. We also discuss the “what if we are wrong” scenario.

Broad Market Valuations

Price-to-Sales (P/S) ratio is a metric we’ve talked about before when referring to market valuations. Using Price-to-Earnings (P/E) ratios to gauge the value of the market, especially in the era of large buy-back programs, is not as accurate as using a metric like sales. Top line revenue, like free cash flow, cannot be distorted. The problem with using free cash flow to gauge the market is that not all promising companies are positive free cash flow, yet the common denominator is they all make sales. 

That being said, the Price-to-Sales Ratio (P/S) of the S&P 500 was at an all-time-high in December 2019 at 2.32. For reference, anything over 1.55 has historically been considered expensive while anything below has been considered a value. Last December’s P/S ratio exceeded both the dot.com peak and the 1929 peak when ratios were just above 2.2.

The market is currently 30% from this all-time peak; however, the current P/S ratio is still hovering around 1.66, notably above the 1.55 historical mean. So, even after a 30% drawdown, we are still relatively expensive.

It’s hard to grasp just how overvalued equities were at their recent peak. Looking at the below image by Crescat Capital puts this into perspective.

The U.S. Market Cap/GDP ratio is one of Warren Buffet’s favorite metrics for gauging value in the market. It is calculated by dividing the total stock market by the gross domestic product. 

After a 33% drawdown, when we briefly breached the 2018 December low, the market traded around the valuations we saw at the 2007 peak. Today, after a slight corrective bounce, we are trading above this level.

Historically, in bear markets, stock valuations move from overvalued to undervalued. So far, according to two important measurements for market valuations, we have gone from very overvalued to slightly overvalued.

Intermarket Analysis

A few weeks ago, we analyzed the more economically sensitive sectors of the economy to see what they were telling us about the potential severity of the drawdown. At the time, these sectors were completely in a bear market or almost in a bear market, while the S&P 500 was still in correction territory. They were leading the market down a few weeks ago and I believe they continue to lead the markets down today. In other words, these sectors suggest more downside.

Every one of these sectors closed below the 2015 high around 2133. They are above the 2016 low, which is around 1800. These sectors, especially the regional banks and financial sectors, are suggesting an unwinding that has been long overdue.

Prior to the 2020 peak, the global debt was at a record high of $250 Trillion, which is over 3x the level of Global GDP. Like in most cycles, as they age, the quality of the debt deteriorates. The U.S. financial sector’s exposure to this debt is still in question and this why the sector continues to lead the market down.

Technical Damage

The amount of technical damage done to the market is extensive. This chart will be a regular update as we progress in either direction. The chart below also outlines what will need to happen in order to squash this bear market from a technical perspective.

So far, the market has failed to retest 1 of the 2 bear market trend lines in red. There are important moving averages, Fibonacci retrace levels, numerous open gaps, and prior peaks, all of which will act as strong resistance. Until we make a higher high and lower low and begin to take back some of these levels, I will be suspicious of any rally.

The below chart outlines the two scenarios that I am tracking for a likely path.

Scenario 1:

Scenario 1 is outlined in blue. The blue count is the count I am leaning towards as most probable. It suggests that the 3rd wave (within the C-wave) has bottomed or is close to bottoming. This will give way to a corrective 4th wave bounce, and then a final 5th wave down to the 2100 region.

Scenario 2:

Scenario 2 is outlined in red. The red count suggests that the 3rd wave will further extend into the 2200 region. If the economically sensitive sectors we are tracking break through the 2016 level, and this 3rd wave keeps extending, then we could see this market trade down to the 1800 level support level.

Regarding a bottom:

In order for the bulls to convince me that they taking back control of this market, I will want to see them take back the 2750 level on the S&P 500.  For me, below this level, and the pressure is down, which puts the above scenarios in play.

Some Good News – Positive Divergences

Beth is covering the speed of the bear market for MarketWatch this week. Since February 20th, the market has gone straight down with minor interruptions. In fact, March of 2020 holds the record for how quickest bear market in history at only 16 days starting on February 19th. The second fastest bear market to occur was the notorious 1929 followed by the escalator drop of 1987.

When calculating how quickly the 2020 market dropped 30%, the juxtaposition of our current situation is even more severe. The bear market of March of 2020 took 19 days to drop 30%, followed by 1987 and 1929, tied for second at 55 days to reach 30% drawdown. The other notorious black swans, the dot-com bust and the 2008 crisis, took almost a full year to retreat 30%.

The good news is that the market structure suggests that we are due for a large degree wave-4 bounce, and the MACD as well as the VIX are supporting this.

Note the MACD in the prior chart regarding the 2 potential scenarios we’re tracking. As the market is making lower lows, the MACD is coiling upwards. This is the type of positive divergence we see when we are approaching a bottom of sorts. This plays into the larger degree wave-4 that I am anticipating.

The VIX refers to the ticker symbol for the CBOE Volatility Index, and has become a popular measure of the stock market’s expectation of volatility based on S&P 500 index options. In other words, it measures the amount of implied or expected volatility in the market.

So, as the market makes new lows, the VIX would typically make new highs because lower prices bring about more fear.

If you look at the above chart, in the final hour of trading, the market began to trend down and closed just above the all-time low for this bear market. However, the VIX also trended down. This is saying that the VIX is seeing a reduction of future volatility, while price is going down. This is a divergence we usually see towards a bottom or the bottom of a bear market.

It’s worth noting, that during the 2008 bear market, the VIX oscillated between the 70 to 50 range four times between October and November of 2008, before finally beginning to slowly trend back down. Basically, the VIX is still in a very elevated state and until it begins to settle down to much lower levels, we will likely not find a meaningful bottom.

What if we are Wrong?

As we stated on the forum to a few readers, this market presents two equal risks to every investor:

-Invest too early and see losses as the market attempts to price in a recession

-Invest too late and miss exceptional pricing (we are already at prices that nobody would have dreamed of a month ago).

Which risk are you most comfortable with? Only you can answer that. We are simply telling you what our plan is based on technical analysis that helps guide the positions we chose from deep-drive research.

I’d like to point out, we are not perma-bears or perma-bulls. We don’t comment a lot on the coronavirus because we are not doctors or health experts. We are sometimes on Twitter but are often too busy with research to tweet frequently.

We believe balanced research is an important strength. We have no desire to be right about calling a market. You won’t hear us pumping our positions during a historic selloff because we feel that it’s irresponsible to say “buy now” when our cost basis is low and we are not buying ourselves.

Instead, once the market broke key support, we worked overtime to find the S&P 500 levels we thought were most probable (and our personal target). We also published technical stops to help protect our readers’ gains. This was based on well over 100 hours of research (closer to 200 hours of research) over the past month on various technical charts and identifying stops and new entries for all of our positions. Our goal is to make money for our readers and to build the best portfolio possible in today’s market.  

Where the market decides to bottom is really anyone’s educated guess. Our targets take into account the potential for the blue and red counts I outlined above. These will be the levels that we will begin to build long-term positions. We plan to continue to hedge these long positions in case we are early.

We are not financial advisors. We use technical analysis to help create emotionless game plans, guide potential entries and manage risk. But, ultimately, you are the main arbiter of your investment decisions.

If your time frame is 5+ years and you can weather a potential 20% drawdown from current levels, then you will likely be glad that you bought at current prices.

There are numerous examples of roughly 30% drawdowns in past pandemic scares that showed a quick V-shape recovery. The level of fear in the market is palpable, and we are starting to see divergences amongst the MACD and the VIX, suggesting a bottom of sorts could be forming.  

Also, there is not much reference for the amount of liquidity being flooded into the market. On the flip side, this could act as a back stop to further economic deterioration.

However, if you believe this indicates THE bottom, it’s worth comparing today to the 2008 recession. During 2007-2009, we saw a 55% drawdown in stocks. However, during that time frame only the financial sector needed a bailout, now the list of sectors that needs a bailout is growing by the week. Also, airplanes were flying, Vegas was open, small business weren’t forced to close, there was no mandatory stay indoors policy and pro sports were still active as well as schools. No one knows the extent of the economic damage this pandemic will cause to the economy because we have never seen such a widespread halting of economic activity in an economy infused with record levels of debt.

Investors have been trained to buy the dip for 11 years. This strategy paid off handsomely for over a decade, and after 2018’s V-shaped recovery, there’s still a belief that we will see another such recovery. This scenario is possible, but I do not believe it is probable.

The structure of the upcoming bounce will be crucial for providing further clues on the on-going direction of the market. If the correction is overlapping and symmetrical, it will support the 4th wave thesis. I’m expecting this to find resistance around the 2500-2600 before topping out. However, if we see heavy volume and a structure that is impulsive – i.e., 5-wave patterns – then it will support the thesis of a potential bottom.

I want to see the 2750 level taken back before I will believe the bulls are in control. We need resistance to be taken back and an uptrend to form before I’m willing to support the idea that a bottom is in place.  

Position Updates

Please reference the Top Stocks List under the spreadsheet section of the site for updates on target entries. Please also reference the forum and the chat rooms for charts. Chat rooms are organized by stock ticker.

From peak to trough, last week saw a correction that traced 15.86% while at the same time breaking the pivot support at 3000 level.

As of now, the 2880-2600 region is crucial, and will be the area in which this correction bottoms or turns into something bigger. Whether we are in the early stages of a bear market or we have struck some kind of bottom, we can expect an attempt a reflexive bounce in the coming days/weeks.

The market needs to work-off levels of oversold conditions, and it will be in this bounce that I will look to increase my hedges and potentially raise more cash.

Obviously, we are not market prognosticators, rather we try to prepare for all scenarios. In fact, as I wrote this today the futures were down 1.3% and are now up 0.5%.

Here’s a glimpse of what COVID-19 has done to China, so far:

One of the major global supply chains has been disrupted. Adding more liquidity in the system via rate cuts will not fully address a supply chain problem. The February/March data will not help the markets, as the global economy slows due to the uncertainty around pandemic fears. So, any attempt at adding to long positions should be done with caution.

On the other hand, I want to point out the number of buyers we found in the NASDAQ at the 200-day SMA.

The above chart shows the Nasdaq. Look at the level of buying that stepped with a spike of green volume at the 200-day MA (noted by the black line). This is a great sign for bulls and should signal, at minimum, a temporary bottom, while we work off overbought conditions.

So, I’d like to offer some perspective on our positions, which have held up quite well considering the blood in the streets. We want to offer you some scenarios that offer good risk/reward trades with an exit strategy that protects your capital.

We aren’t financial advisors. Instead, we are actively seeking the best tech stocks at the best prices.

Elastic (ESTC)

We spotted the same setup in Elastic as we saw in Zoom when it was below $70. In Elliott Wave, it’s known as a 1-2, i-ii setup, which we see just before a powerful wave 3 takes over. On the forum, we pointed this setup out, and put a stop just under $63.50 on the closing price. The stock closed at $63.80, then earnings propelled ESTC 18% in a market that was down around 3-4%.

The bad news is that the probability of this setup holding is not favorable, per my count. We saw negative divergences within the RSI, MACD and MACD Histogram, suggesting the momentum is just not behind the move. Also, the Accumulation/Deceleration line, which measures if the price move is supported with volume and if that volume is “smart money,” also diverged.

I am holding a stop just under $69.25 to protect the gains we got for this move.

Roku (ROKU)

Roku has provided us with clear support levels. The first was at $125, which held for some time. Now, we are trading within the $115-$112 region, which Roku is now struggling to maintain. The recent buying pressure to push it back into the range was weak, and the “smart money,” which typically positions in the final hours of a day, is not buying right now.

The MACD failed at the 0 line, and is now in a clear decline below the range that held price within the tight descending wedge pattern for many months.

My stop for Roku is just under $86, and I’ll move my stops up if we get a bounce here.

It’s also worth pointing out the valuation of Roku at these levels compared to its runway. We believe, even in a a global recession, Roku’s business model is primed for growth. However, the stock market can have moments of being extremely mispriced, especially with misunderstood tech. It is for this reason that I have a stop in place for any new positions.

Nvidia (NVDA)

Nvidia found heavy buying at the $244 support region I pointed out in the last market update, which also coincides with the 55-day EMA. This also coincides with the middle of the target box we were watching. For us to have a bottom in place, the $244 region will be the battle ground going forward.

Even in light of the drawdown we saw in the market last week, where the vast majority of stocks in the market are trading at or below their 200-day moving average, Nvidia held the 55-day EMA with the MACD staying above the 0 line.

For anyone looking for a reasonable risk/reward entry for Nvidia, one scenario is to consider is entering at current prices, with a stop just under $241. This is a good setup to play any upside, while protecting from any further downside that may play out. Like with other positions, move your stops up as price increases.

Qualcomm (QCOM)

Qualcomm’s internals, as shown by the MACD, are showing that the selling halted and began to turn up well below the 0 line, with the histogram confirming this. The 38.2% retrace level, which is highlighted in blue on the chart around $73-$72 found buyers to step in and halt the decline.

However, it’s worth pointing out that QCOM stalled just below the 200-day MA, which is the psychological barrier that separates a downtrend from an uptrend. I would want to see it take back this region, which I expect it will, based on how over sold it is now, as a sign that, at minimum, a relief rally is underway. For anyone looking to go long, I’d hold a stop just under this level. A good stop would be $72.50.

Alibaba (BABA)

Alibaba is showing a lot of strength at the $200 region. For anyone who has been following us since we first covered BABA on our premium site, when it was trading around $180, you’ll remember that the $200 region was a tough hurdle for BABA to break above. Now that the price cleared this zone on the way up, that region is acting as strong support.

The internals are showing an easing of the selling momentum at this region. The MACD histogram is showing positive divergence, as the price is beginning to turn up below the 0 line. The Accumulation/Deceleration index is actually going up as the price is going down, which means that the “smart money” is buying into this decline.

For anyone looking to go long BABA, current levels with a stop at $197 would be a reasonable risk/reward setup. We believe in the long-term business model of BABA. If the coronavirus beats the stock down, we think that will be a gift.

This is a company to own for the long haul; however, the stop will protect us from another leg down in the correction if we get it before a bounce.

Zoom (ZM)

Zoom has been a fantastic position to hold during the sell off. In fact, while the market is down about 13%, Zoom is up about 3%. However, notice the very large Bearish Engulfing Candle that engulfed most of the move since the correction began. This is not a good sign for Zoom. This specific candlestick pattern usually precedes a change in trend, whether this change is the beginning of a failed impulse, which we’ve been tracking since wave-1, or it’s the wave-4 pullback we have been waiting for, only time will tell.

I have provided 2 stops: (1) the tight stop would be just under $94; (2) the wide stop would be just under the AVWAP, which is just under $84.

The Trade Desk (TTD)

It’s worth pointing out just how strong the Trade Desk has performed during this correction. As of now, it is only down about 10%. It found a swarm of buyers at the 200-day MA. After earnings, it quickly took back it’s 55-day EMA, and also the 10-day EMA.

The MACD is still under the 0 line with the histogram beginning to turn up, which is signaling bottom of sorts. Also, the Accumulation/Distribution line is making new highs before the price. There is a good chance that TTD makes new highs in any relief rally we get.

For any longs, I would watch the 55-day EMA as support and even as a stop, which is around the $275-$270 region as I write.

Dynatrace (DT)

Dynatrace has retraced to the upper region of our target box and found strong support around the $30 region, which is highlighted in blue on the chart. This also overlaps with the 55-day EMA in blue on the chart. The Internals are suggesting that at current levels we have not seen an exhaustion of selling.

For any longs at this region, I’d suggest a tight stop around $29.40 just in case we break this support. We have raised our stop to this point to protect our gains. Below here and we will likely see the $27.50 region come into play pretty quickly.

The Recent Pullback

Despite coronavirus fears that many were forecasting could lead to a crash, the market remained fairly stable. While the market was overextended in valuations we rarely see, it took the fear of a global pandemic to knock the indexes down just 3%.

The market hit the top end of our target at 3220, as mentioned in last week’s market update. Regarding the correction, 2.5% is what we got in the NASDAQ before the market caught a strong bid that pushed the index to new highs. The SPX soon followed.

A few things I’ve noticed this week:

• Some extremes we’re seeing in the current Put-Call Ratio.
• All-time high in the U.S. PEG ratio,
• NASDAQ is reaching new highs while more than half the index is still at least 20% off their 52-week highs.

In short, a handful of stocks in the index are accounting for most of the returns. So, this is not a broad market uptrend. Therefore, I am not sure the correction is entirely over. We will monitor this as we go along. While the main indexes are reaching all new highs, it’s doing so without the transport index and small cap index doing the same.

The small caps represent the health of the domestic economy. Considering the vast majority of their revenue is domestically centered, they provide a better gauge for the domestic economy. The transport sector also reflects economic health simply because when businesses are booming, they need to transport more goods for sales. Until these indexes join in the broad market with new highs, the current uptrend should be closely monitored.

The market climbs a wall of worry, and the current environment is no exception. You will always be able to find reasons to not invest until it is too late. I have a stop in place with every trade so I don’t have to worry about a crash.

My goal is to try to buy stocks near key supports with tight stops, or when they are breaking out. As stated on the forum, as well as the last market update, we bought the recent dip, and will continue to until the broad market breaks key supports.

In the meantime, I’m holding some cash for new opportunities, have stops on all my tech positions, am hedged with a few choice gold/silver plays as well as some cheap, long-dated puts on indebted companies. And, most importantly, I’m staying with the general trend, which is up. The key level to watch today in regards to the recent correction is SPX 3290. If this support breaks, we will likely see a retest of last week’s lows, and the levels I outlined in the last market update will be back on the table.

Telaria (TLRA)

Last year, small caps started to break out. We did published report on this opportunity early-on, showing that small caps are trending towards recessionary levels while large caps continued to make new highs. The thesis was that if we are not heading into a recession in 2020, then small caps have a large gap to fill in order to catch up. Even though small caps have not made new highs, they began to breakout of their range, trending towards new highs. It was based on this thesis that we added to our two small cap positions with Telaria being one of them, and since then we are up about 40%.

The structure of Telaria is a complex one, which can be analyzed from various angles. It is because of this that I focused exclusively on the 5-wave uptrend we are currently in. Since TLRA was acquired, the 55-day EMA has been strong support for the price (the red line).

If TLRA breaks the 55-day EMA, the levels to watch are the $8.50, $7.90, $7.15, $6.20. These areas are derived from the ratios on the right of the chart, which are price clusters that are taken from various Fibonacci ratios applied to the structure of TLRA. There are very tight clusters that will define the important levels to watch if TLRA breaks the 55-day EMA.

As of today, I am raising my stop to either $8.25 or the 200-day SMA, which ever gives first. This will give the first support region some room to breathe. If this stop is triggered, it will lock in about a 20% gain from our initial position, and we will look to re-enter down the road.

However, if Telaria can break out to new highs at $11.82, we could see it trade in the $13 before any sizable pullback. If this happens, our stops will be raised to compensate.

The Trade Desk (TTD)

We are long The Trade Desk, and have been since their last earnings report. The recent breakout to new highs, suggests that the current 3rd wave that we are in is not over, and the next level I’m targeting is around the $350-$375 area before we see a pullback. However, it’s worth noting that we haven’t fully cleared the $296 region, and until we do, the risk is that the 3rd wave is topping at current levels is still present.

The internal momentum is fading while price is going up, which is not preferable as a price breaks out to new highs. However, we like TTD for 2020, so on any pullback, we will be adding to our current position.

Zoom (ZM)

We have been covering Zoom weekly, mostly because the bullish setup offered a great low risk/high reward opportunity. Going long in the mid-low $60s with a stop just under the all-time low at $59.95 was the setup we were offered our premium readers twice.

This also lined up with the 1-2, i-ii bullish setup we talked about in the last few market updates. If this was valid, we targeted the $87 region for a wave-3 top, which is exactly what we got the day of the breakout. The following day we extended to the $92 region before correcting.

The volume spikes are encouraging, as well. We saw an influx of buyers at key resistance step in. The RSI is showing positive divergence, suggesting the current pullback will likely be shallow before completing its 5th wave push. The MACD is also well above the trendline. All of these internal signs are suggesting a healthy uptrend.

As long as Zoom holds the $75.75 region, the larger degree 3rd wave uptrend is in place. That would put us in internal 4th wave of the larger degree 3rd wave. If valid, this will likely test new highs before we get the larger degree wave 4th wave pullback.

Boingo (WIFI)

Boingo is one of my favorite setups today. We have, like with Zoom, a 1-2,I-ii setup in place. This also is showing up as a standard cup and handle pattern. If WIFI can break above $13.40-$13.50 region with heavy volume, we will likely see strong uptrend, much like we witnessed with Zoom. If this is valid, I’m targeting the $20-$21 region.

Further proof comes from the structure of the handles in the above chart. Notice the 3-wave move, where the final wave ended exactly at the 127.2% extension of the first wave. This is textbook Fibonacci trading, which lends the current bullish setup being valid. In summary, as long as $9.55 holds, which is a wide stop, I’m long WIFI at current prices.

Slack (WORK)

We recently sold out position in Slack around the $23.50 area this time around. It appears that Slack, yet again, is topping out within its very tight range, and will retest the $20-$19.50 region. After climbing nearly 20%, which falls in line with the symmetry we pointed out in the last 2 attempts to breakout, we can see negative divergence between the RSI and price.

Also, the MACD is rolling over at higher highs. All of these signs are suggesting that a breakout may not happen this attempt. We will look to go long again if Slack can clear the $24.30 region, or if it finds another bottom around $20. Eventually Slack will break down or break out, and based on how range bound it has been, this move should be a strong one.

Datadog (DDOG)

Datadog is another stock with limited price action that is providing a complicated and ambiguous structure. Right now, I am giving the uptrend the benefit of the doubt and will keep this count as my primary one unless DDOG breaks through the $39.60 region. Below this region, which is my current stop, and DDOG will likely retrace in a more bearish count.

So far, the internals are lining up with the price in a healthy uptrend. Also, the yellow region on the chart highlights a very tight cluster of important Fibonacci prices, which should act as strong support.

Roku (ROKU)

Roku has been trading within a descending wedge pattern since December of last year. These patterns more often than not, resolve themselves in the direction they are pointing. The MACD confirms this with the direction it is pointing in, as well.

The blue and red regions on the chart highlight recent drawdowns, and they coincide with the colored ratios on the right of the chart. Symmetry is a strong force in technical analysis, and we can usually target the length of prior drawdowns for important inflection points.

The red area region highlights a, roughly, 21% drawdown. If we measure the length of this drawdown from the top that followed it, that will take us to $120.83 (or the 100% extension).

We have been layering in at this level, which also coincides with the 200-day SMA. If we break through this level, the next support region will be between $112-$115. Below that, and we will reach the 100% extension of the drawdown highlighted in blue, which will take us sub-$100.

I’m expecting us to at least hit the $112-$115 region, which I will use to layer in more longs. Roku sub-$100 would be a gift, based on our future calculations on where this we see this company going within the connected TV ad space.

Pinterest (PINS)

After reporting stellar earnings, Pinterest is set to open tomorrow with heavy volume, through the above resistance cluster between $24.75-$25. There is a heavy confluence of important prices, coupled with the 38.6% retrace level, which also happens to coincide with PINS closing the gap.

Breaking through an important price resistance with force is exactly what we want to see. What we want to see next is – can PINS hold the $24.75-$25 region as support now that it has broken through? We will likely see a retest of this area, and that is where I will look to add to my current position.

Quick update from Beth: the 5G spreadsheet is coming out this upcoming week. We got a little delayed as we have twice as many companies we are tracking as we do for cloud. Should be out Mon-Wed of next week.