OVERVIEW
We See Follow Through

After what might have felt like an interminable wait, we are inclined to declare an end to this two-month-long period of healthy pullback. In our analysis yesterday, we highlighted a crucial indicator: the behavior of leading stocks that have breached their volatility contraction patterns (VCP).

The pivotal sign to watch for was whether these stocks would sustain their upward momentum, finding solid support above the areas they had broken through, with previous resistance levels transitioning into support zones. Encouragingly, we are observing precisely this trend in several stocks.

Indeed, institutional sponsorship has been on the rise, particularly in the mega-cap behemoths that have recently reported earnings or are on the verge of doing so. This surge in institutional interest has functioned like a magnet, drawing in substantial cash inflows into the market. Consequently, we've witnessed a ripple effect, bolstering overall investor sentiment and exerting a positive force on other stocks that may have received less attention previously, propelling them to higher share prices. This dynamic highlights the interconnectedness of various market sectors and the potential for broader market movements to impact a range of stocks, not just the headline-grabbing giants.

Now, it's time to begin taking action. In straightforward terms, we recommend that swing traders prepare themselves to start to seize this opportunity to build up their long positions on the stocks they've been monitoring closely in recent months. With signs indicating a potential upswing in the market, this is a period to act with confidence and accumulate positions that align with your trading strategy.

We continue to emphasize the importance of not blindly buying without first ensuring that the setup is valid. Patience remains crucial to avoid overexposing yourself too early in the market. It's essential to carefully assess market conditions, confirm technical signals, and maintain discipline in executing trades. Rushing into positions without proper evaluation can lead to unnecessary risks and potential losses even in what appears to be the end of a several month long pullback.

Nasdaq

It appears that the QQQ is facing a significant challenge as it attempts to surpass the $440 level, which represents a dense supply zone. Given the current level of market participation, breaking through this barrier may not come easily, and we anticipate a short-term rejection against this zone.

However, it's important not to be deterred by this potential setback. Consolidation is not only natural but also beneficial, particularly at these elevated levels. A period of sideways movement, often referred to as "chop," above the volatility contraction pattern (VCP) break signifies that buyers have successfully reclaimed prior resistance levels, indicating comfort with the new share price.

The 4-hour Visible Range Volume Profile (VRVP) chart is revealing a noticeable 1% gap between the current levels and the 4-hour 10-period Exponential Moving Average (EMA). Additionally, it's worth noting that the QQQ is securely positioned above its Point of Control (POC), indicating significant buying interest in this area. Furthermore, there's a substantial supply/demand cushion, extending down to the $436 zone, which we anticipate will be revisited in the days ahead.

Given these observations, it's likely that the market will seek to fill the noted gap and revisit the lower end of the supply/demand cushion around the $436 level. This movement aligns with the principles of price action and market dynamics, as markets often gravitate towards areas of significant volume and liquidity.

S&P Midcap 400

Midcap exhaustion is evident with a clear rejection at the $547 supply zone on higher volume. Yesterday's candlestick, coupled with increased volume, suggests sellers dominated while buyers remained subdued, despite MDY reaching recent highs. This divergence indicates, as we also observe on the Nasdaq, that a period of consolidation at these new highs is necessary.

Russell 2000

The small caps are mirroring this pattern, displaying evident exhaustion at the Point of Control (POC) level of $205. Market participation in the Russell 2000 was notably low, which was expected considering the speculative nature of small caps.

We anticipate that the retraction and consolidation on the IWM will be the most volatile, considering the heightened volatility of the index. Therefore, a more pronounced pullback towards the end of the week could potentially bring the Russell 2000 back to the $202-$200 level. This level serves as a significant support zone, and a retreat to this range wouldn't be unexpected given the current market conditions and the historical behavior of small-cap stocks.

DAILY FOCUS
The Trader & The Grocery Shopper

As swing traders, we often liken our approach to that of a discerning grocery shopper. Just as a shopper selects only the best and healthiest produce within their budget, we seek out trades that offer the highest quality and potential return on investment relative to the associated risk.

Our task today and in the upcoming days is to initiate the evaluation process for potential stock purchases. We'll closely examine their recent performance over the past few months, identifying stocks that offer the best "value-for-money" based on their revenue and earnings per share (EPS) growth, as well as their technical setups. This presents an opportune moment to begin considering entry positions.

We won't rush into any positions today, but we'll be on the lookout for breakouts or earnings-driven episodic pivots that meet our entry criteria. We'll remain vigilant, acknowledging the potential for necessary consolidation at these recent levels following index-wide breakouts. However, given the influx of earnings reports, we're also mindful of not missing out on potential opportunities.

WATCHLIST
Our Favourite Merchandise

MYO: Myomo Inc

• Myomo, Inc. will report its earnings today. With a multi-month base and exceptional revenue growth, we're closely monitoring its performance today and into tomorrow.

• We don’t expect to see much action in today’s session however we hope to see MYO hold above it’s rising daily 10- EMA it is currently holding.

ACMR: ACM Research

• ACM Research, Inc. specializes in creating, producing, and selling single-wafer wet cleaning equipment for the semiconductor industry. Their solutions assist semiconductor manufacturers in various production stages by eliminating particles, contaminants, and defects, ultimately enhancing product yield.

• ACMR has been forming a significant base since its earnings report in March, showcasing robust fundamental growth.

• The stock posted a beat today in both EPS and Revenue, with increases of 69% and 3%, respectively. It is currently gapping up in pre-market trading.