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The Stocks We Are Buying

Swingly Exposure Status: Risk On

OVERVIEW
This Is A Big Week

The US equities market has reached all-time highs in the past week. After a recent pullback, the major indices have broken above their previous highs, with Microsoft's earnings report several weeks ago marking the beginning of the recent rally. This report, showcasing strong fundamental growth in the hottest sector, led to a massive influx of cash. Microsoft's stock surged over 7%, adding almost $220 billion to its market value within two weeks.

The US equities market has reached all-time highs in the past week. After a recent pullback, the major indices have broken above their previous highs, with Microsoft's earnings report several weeks ago marking the beginning of the recent rally. This report, showcasing strong fundamental growth in the hottest sector, led to a massive influx of cash. Microsoft's stock surged over 7%, adding almost $220 billion to its market value within two weeks.

This surge subsequently drove the capitalization-weighted index, the Nasdaq, to push above its volatility contraction pattern (VCP) in early May, further driving other stocks above their consolidation bases. Several technology stocks in similar sectors have also broken higher, including SMCI, MSTR, AAPL, and GOOGL, all trading at all-time highs and contributing to the increasingly bullish market sentiment.

We are very bullish

There are no key economic reports this week that might cause unexpected volatility to the downside, potentially undercutting the market's advances. Additionally, we've primarily seen the mega-cap stocks leading the charge, with mid and small caps slightly lagging.

This rally still has incredible room to continue rising, and breadth will likely expand as more speculative money begins to trickle down to less established companies in the market. We also have several significant earnings reports this week, notably Nvidia's on Wednesday. Their report is likely to cause volatility, either to the upside or downside, depending on the figures. Given Nvidia’s history and its crucial role in the rapidly growing AI sector, we anticipate a strong earnings-based pivot to the upside.

As swing traders, this is the time to be at your A-game and start accumulating positions in companies that are pushing higher. This is the time to buy and go risk-on. Be aggressive and trust your conviction.

Nasdaq

QQQ VRVP Daily Chart

The QQQ chart screams bull market.

Before we get any further, we want to draw attention to the visible range volume profile (VRVP) on Friday’s session. Intraday, the price dipped to $449, only to witness an incredible level of buyer aggression pushing the price almost back to breakeven. The volume at this level is predominantly blue, indicating strong buying activity, while yellow represents selling volume.

There is very little selling pressure, especially when examining the last two red sessions, which were both inside candles to the last leg higher. These red days showed no significant influx of new sellers attempting to drive prices lower. This red volume is deceptive, as it actually reveals real buyer aggression and very passive selling.

In simple terms, the majority of participants are holding their shares or accumulating as QQQ prices trend slightly lower, rather than being scared off by the small dips to $449.

We anticipate QQQ driving even higher this week and continuing its upward march. We are very excited for this week.

S&P Midcap 400

MDY VRVP Daily Chart

The midcaps are trading firmly above their point of control (POC) and finding support as they trend higher. While the chart is less “aggressively bullish” compared to their larger counterparts, it remains bullish nonetheless.

The MDY found support around the $550 volume level; however, the VRVP isn’t demonstrating a high level of demand at this point. The levels above $551, where the index currently sits, do show that buyers are stepping in more firmly to prevent further downside movement. We might also see the MDY waiting for its rising daily 10-EMA to catch up before pushing even higher.

The $556 level coincides with prior all-time highs, especially when viewed on the weekly chart, so it was no surprise that the MDY encountered resistance there. Hopefully, this zone can be broken, given the Nasdaq’s strong positioning and the overall bullish sentiment in the market.

Russell 2000

IWM VRVP Daily Chart

The small caps are painting a similar story to the MDY. The overall trend is bullish and looks very healthy, especially given the improving overall market sentiment. However, in the immediate short term, we do see potential consolidation as demand needs to increase for the IWM to break its prior all-time highs above $209.

The VRVP indicates more fear and doubt in the small-cap space, especially as the index approaches the $210 mark—a multi-year resistance level that has yet to be firmly broken.

We suspect the IWM will continue to move higher in the medium term; however, this week may see prices chop around sideways unless significant speculation money comes in, in sympathy with the mega caps driving the overall market higher.

DAILY FOCUS
Holding & Buying More

With sentiment having significantly improved in the last couple of weeks, breadth having expanded, and the leaders having broken higher and seen follow-through in their expansions, we are confident that this is the period to look to accumulate long exposure. We are actively seeking entries in stocks that meet our criteria and are trending higher.

As of today, we own positions in several growth companies including ROOT, SEZL, and DAVE, all of which are performing well. We intend to add to these positions in secondary and tertiary breakouts in the coming days and weeks.

While we anticipate further upside this week, we urge our readers to remain disciplined and not blindly buy without a valid setup presenting itself.

WATCHLIST
What We Want To Own

GCT: GigaCloud Technology Inc

GCT Daily Chart

  • GCT once again is at the top of our list due to its incredible fundamental growth, relative and absolute momentum, coupled with the multi-month base.

  • We attempted a long position on Friday, which resulted in a loss as the stock broke back down into its volatility contraction pattern (VCP).

  • We are eyeing a long position this week, provided GCT continues to hold this pattern and pushes to break above the $37.50-$38.50 level.

TSLA: Tesla, Inc

TSLA Daily Chart

  • Tesla has been significantly beaten down and is one of the mega caps that has suffered the most in the recent broad market downturn, retracing approximately -35% since the beginning of 2024.

  • Following its earnings, we witnessed a surge in the stock, which is currently forming a tight range above its daily 10, 20, and 50-EMAs.

  • Upon a high volume break, we intend to enter long positions above $180, possibly through a 2x or 3x leveraged ETF.

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This newsletter does not provide financial advice. It is intended solely for educational purposes and does not constitute investment advice or a recommendation to trade assets or make financial decisions. Please exercise caution and conduct your own research.

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