Good morning and welcome to this week’s Flight Path. The “Go” trend in equities continued again this past week but we saw some weakness as GoNoGo trend painted a few weaker aqua bars. Treasury bond prices experienced a change in trend as a few bars of “Go Fish” gave way to a purple “NoGo” bar. U.S. commodities painted a full week of strong blue “Go” bars and the dollar also saw strength return with strong blue bars.

$SPY Shows a Little Weakness with Aqua Bars

The GoNoGo chart below shows that price has moved mostly sideways since the last high and the Go Countertrend Correction Icon (red arrow) that came with it. The waning momentum suggested that price may have a hard time moving higher in the short term. GoNoGo Trend has painted a few weaker aqua bars as well and we see GoNoGo Oscillator testing the zero line from above. It will need to find support here and if it does we will be able to say that momentum is resurgent in the direction of the “Go” trend.

On the longer term chart, the trend continues to be strong. However we are seeing the price range shrink as we edge higher. GoNoGo Oscillator is not in overbought territory and seems to be resting at a value of 3. We will watch to see if the oscillator falls to test the zero line perhaps in the next few weeks.

Treasury Rates Return to Paint “Go” Colors

Treasury bond yields reversed course and after consecutive amber “Go Fish” bars that often come as a transition between trends we see the indicator painting “Go” colors again. GoNoGo Oscillator has broken back into positive territory which confirms the trend change that we see in price above.

The Dollar Sees a Return to Strength

The dollar rallied this week with a string of uninterrupted bright blue “Go” bars. Price is approaching resistance from prior highs and we will watch to see if it can continue higher. GoNoGo Oscillator broke back into positive territory and we saw a Go Trend Continuation Icon (green circle) indicating that momentum is resurgent in the direction of the “Go” trend. We will watch to see if this will give price the push it needs to make a new high in the coming days and weeks.

Today Erin looks at the Broadcom (AVGO) chart and compares it to the NVIDIA (NVDA) chart. She shows us the differences between the two and tells you whether she believes AVGO will be the new NVDA, meaning it will perform as NVDA used to perform with a concerted move up nearly everyday.

Carl analyzes the market and gives you all you need to know going into this trading week. He discusses his thoughts on where the market may be headed in January. Can the rally continue?

After the market overview, Carl covers the Magnificent Seven in the short term and the intermediate term by looking at both the daily and weekly charts for each.

The pair then answer questions posed by audience on OBV construction and a discussion of how we use the Bias Table for short-term analysis. Currently the table is flipping bearish.

Erin covers sector rotation and gives us two sectors to watch moving into this week. Two sectors are in decline but they have both reached very interesting levels of support that could precede an upside reversal.

Finally Erin covers viewers symbol requests.

If you’d like to join us in the free DP Trading Room on Mondays at Noon ET, sign up at this link: https://zoom.us/webinar/register/WN_D6iAp-C1S6SebVpQIYcC6g#/registration

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01:06 DP Signal Tables

04:22 Semiconductor Chart

06:39 Market Overview

17:27 Magnificent Seven

23:46 Questions

30:52 Broadcom v. NVIDIA

38:16 Sector Rotation

42:04 Symbol Requests

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Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin

(c) Copyright 2024 DecisionPoint.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.

Helpful DecisionPoint Links:

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Bear Market Rules

The markets had a wide-ranging week once again; however, they ended near its high point this time. The Nifty had ranged sessions for four out of five days; the last trading day of the week saw the Nifty swinging wildly before closing near its high point. The trading range also remained wider; the Index oscillated 611 points over the past sessions. The volatility, though, took a back seat. The India VIX came off by 7.69% to 13.05 on a weekly basis. The Nifty closed a notch above its immediate resistance points; the headline index finished the week with a net weekly gain of 90.50 points (+0.37%).

The week was set to end on a negative note had the markets not surged higher on Friday. From a technical perspective, Nifty has resisted the 100-DMA placed at 24709 over the past several days. Following a massive rebound that the Nifty witnessed from lower levels, the Index has closed a notch above this important resistance level. For this upmove to extend itself, Nifty will have to stay above the 24700 level. Any slippage below this point will again send the Nifty back inside the wide 24400-24700 trading range. Failure to sustain above the 24700 mark will mean an extended period of consolidation for the markets. However, the longer the Nifty stays above 24700, the greater the possibility of this upmove extending itself.

The coming week is expected to start quietly, with the levels of 24790 and 25000 acting as resistance points. The supports come in at 24590 and 24400 levels. The trading range will continue to stay wider than usual.

The weekly RSI is 56.37. It is neutral and does not show any divergence against the price. The weekly MACD is bearish and stays below its signal line.

The pattern analysis of the weekly charts shows that the Nifty suffered a brutal mean reversion process. The Index was 16% higher than its 50-week MA at one point in time. During the recent sharp corrective move, the Nifty tested this level again. It subsequently found support and staged a strong technical pullback. The market’s finding support at the 50-week MA has reinforced the credibility of this level as one of the important pattern supports for the market. On the daily timeframe, the Nifty has attempted to cross above the 100-DMA level after resisting it for a couple of days.

The markets may attempt to resume the technical pullback that it started by rebounding off the 50-week MA level. For this to happen, it would be crucial for Nifty to keep its head above the 24700 mark. It is also important to note that any slip below the 27400 level would drag the markets back inside the consolidation zone. The volatility is once again towards the lower end of its range; there is a possibility that we may see a surge in volatility in the coming week. It is recommended that investors stay invested in relatively stronger stocks and sectors. Rather than blindly chasing the rising stocks, investments must be appropriately rotated into the sectors showing stronger or improving relative strength. While mindfully protecting profits at higher levels, a cautious outlook is advised for the coming week.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG) show no major change in the sectoral setup. The Nifty Bank, Financial Services, Private Banks, and IT indices are inside the leading quadrant. These groups are likely to outperform the broader markets relatively.

The Pharma and Midcap 100 indices are inside the weakening quadrant. These sectors are likely to see a continued slowdown in their relative performance.

The FMCG, Energy, Media, Auto, Energy, and Infrastructure indices are inside the leading quadrant. These groups may exhibit relative underperformance against the broader Nifty 500 index.

The PSU Bank index continues to rotate firmly inside the improving quadrant. The Realty and Metal indices are also inside the improving quadrant, and these groups are likely to improve their relative performance against the broader markets.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

In this video, Mary Ellen highlights how select M7 stocks, mostly TSLA, propped the markets up while some sectors continued to trend lower. She reviews how to find entry points in winning stocks, and also discusses why Small Caps are falling.

This video originally premiered December 13, 2024. You can watch it on our dedicated page for Mary Ellen on StockCharts TV.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

In recent interviews for my Market Misbehavior podcast, I’ve asked technical analysts including Frank Cappelleri, TG Watkins, and Tom Bowley what they see happening as we wrap a very successful 2024.  With the Nasdaq 100 logging about a 30% gain for 2024, it’s hard to imagine that incredible bullish continuing into 2025.  But it is definitely possible!

Q4 has seen the return of the dominance of the Magnificent 7 stocks, with charts like META breaking to new all-time highs.  Despite weaker market breadth conditions all around, indexes like the Nasdaq 100 have remained quite strong driven by the strength in mega cap growth.

While Q4 of an election year tends to be quite strong, once investors are able to gain at least some clarity of what to expect in terms of policy changes in the years to come, Q1 of a post-election year tends to have mixed results!

Today, we’ll lay out four potential outcomes for the Nasdaq 100.  As I share each of these four future paths, I’ll describe the market conditions that would likely be involved, and I’ll also share my estimated probability for each scenario.  

By the way, we conducted a similar exercise for the Nasdaq 100 back in September, and you won’t believe which scenario actually played out!

And remember, the point of this exercise is threefold:

1. Consider all four potential future paths for the index, think about what would cause each scenario to unfold in terms of the macro drivers, and review what signals/patterns/indicators would confirm the scenario.
2. Decide which scenario you feel is most likely, and why you think that’s the case. Don’t forget to drop me a comment and let me know your vote!
3. Think about how each of the four scenarios would impact your current portfolio. How would you manage risk in each case? How and when would you take action to adapt to this new reality?

Let’s start with the most optimistic scenario, with the QQQ achieving a new all-time high over the next six to eight weeks.

Option 1: The Very Bullish Scenario

For the most bullish scenario, I basically assumed that the uptrend we’ve observed since September continues at a very similar pace.  That would mean the QQQ could reach up to around $560 or so by the end of January.  For that to happen, we’d need charts like NVDA to resume their uptrends, charts like META to hold their recent breakout levels, and all the other sectors to resume a more bullish configuration!

Dave’s Vote: 10%

Option 2: The Mildly Bullish Scenario

What if the Magnificent 7 names slow down a bit, and even though other sectors like financials and industrials begin to outperform, it’s just not enough to push the benchmarks much higher?  Scenario 2 would mean a slower pace to the recent advance, but the bullish phase would still keep the QQQ this week’s close around $530.  Perhaps the Fed meeting next week suggests a more measured pace to rate cuts in early 2025, and investors grow a bit more skeptical that this market euphoria will continue.

Dave’s vote: 20%

Option 3: The Mildly Bearish Scenario

The bearish scenarios basically assume that this week’s high is about it, and even though we may drift a bit higher into year end, January 2025 looks a lot like January 2022.  The mildly bearish Scenario means we pull back a bit, but not enough to push the Nasdaq 100 below “big round number” support at $500.

There are a number of ways this could play out, but perhaps the first run of economic data in January, combined with a disappointing beginning to earnings season, makes us all realize that the euphoria of 2024 is now in the rearview mirror!

Dave’s vote: 60%

Option 4: The Super Bearish Scenario

You always need a super bearish scenario, if only to remember that it’s always a possibility regardless of whatever’s happened in recent months!  Scenario 4 would mean about a 15% decline in January, which would actually be a fairly reasonable corrective move based on market history.

If economic data shows that inflation is not remaining in the 2-3% range, or if earnings season is punctuated by a series of high profile misses, or if the Magnificent 7 all begin breaking down, this super bearish scenario could become a reality in short order.

Dave’s vote: 10%

What probabilities would you assign to each of these four scenarios?  Check out the video below, and then drop a comment with which scenario you select and why!

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.

There are a number of ways that you can find great trading opportunities. One way is to simply follow a chart on a WatchList and wait for certain indicators to reach “buy” points. For instance, an uptrending stock many times will find support as its 20-day EMA is tested or when its RSI approaches 40 during pullbacks. For this article, however, I want to show you an interesting way to use RRG charts to accomplish the same thing, only RRG charts might be better for traders who visualize movements better when comparing relative moves.

Live Nation (LYV) is in the communication services (XLC) sector and from early-August through late-November, it was in a stealth uptrend outpacing nearly all stocks on a relative basis as it gained over 60% in that 3 1/2 month span. I like to see 20-day EMA tests and this one is quite clear:

There’s a lot to like here as LYV’s industry group – broadcasting & entertainment ($DJUSBC) – is now showing much better relative strength to the S&P 500. In other words, money is rotating INTO the entertainment area and, as an industry group leader, LYV is reaping the rewards. The early-December selloff has taken LYV out of overbought territory on its RSI and allowed it to test its rising 20-day EMA, setting up for a bounce.

If I use the weekly and daily RRG charts and dissect the component stocks within the communication services sector, here’s what I find:

Weekly RRG – XLC

I’ve highlighted LYV as it’s the furthest XLC component stock to the right and in the leading quadrant, showing both strong bullish momentum and excellent relative strength. That tells us that we have a stock worth watching for possible trade setups during periods of short-term selling. For that short-term selling and how it looks on a daily RRG, let’s drill down to that time frame and check it out.

Daily RRG – XLC

Once again, I’ve highlighted LYV so that you can visualize its movement from an RRG perspective. From experience, many leading stocks will have short-term pullbacks where they move all the way through the Weakening quadrant, only to turn higher and head back towards the Leading quadrant. LYV’s sharp chart would show this as a rally back to test the recent price high. If and when that occurs, we’ll see LYV’s daily RRG chart turn back towards the Leading quadrant. But my point here isn’t whether LYV moves higher again for us to make money. Instead, I’m simply pointing out how healthy stocks will look on their weekly and daily RRGs. The weekly chart will highlight a stock’s powerful recent move higher and the daily chart will help us to identify those bullish stocks, and possible entry points, that are experiencing short-term weakness.

As a swing trader, this is EXACTLY what we want to look for.

Huge RRG Event

Saturday morning at 10:00am ET, Julius de Kempenaer, Sr. Technical Analyst here at StockCharts.com and the founder and creator of RRG charts, will join me for a FREE (no credit card required) EarningsBeats.com event, “Key Rotation Into 2025”, where we’ll use RRG charts to show everyone the critical rotation that’s taking place now that will likely help shape the direction of our major indices during the balance of 2024 and throughout 2025. For more information and to register for the event, CLICK HERE.

If you cannot make the event live, those registering will receive a copy of the recording of the event that you can check out at your earliest convenience. So please register NOW and save your seat!

Happy trading!

Tom

After the November pullback, GLD began to rally again. This week, on Wednesday, price exceeded the nearest November top, which made official the new rising trend from the November low. Brief celebration ends the following day as GLD tops, setting the top boundary for a bearish rising wedge formation. Rising wedges are bearish because they normally resolve downward.

GLD has rallied +40% since the February low, so it is entitled to take a break.

The weekly chart shows the root of the problem, which is the parabolic advance (+71%) from the 2022 low. Parabolic advances beg for correction, which can sometimes be severe. In the case of GLD, we do not expect more than a sideways digestion process to dampen the angle of ascent.

The monthly chart emphasizes the steepness of the advance to all-time highs, and the need for some digestion or correction. Should gold pull back, two support levels are apparent: 2450 and 2085. We think the second level is unlikely because sentiment is still too bearish.

Conclusion: Gold has had a very profitable rally since the 2022 low, and it would be beneficial for it to take a break with either a pullback or consolidation. It appears that that process has begun.

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Technical Analysis is a windsock, not a crystal ball. –Carl Swenlin

(c) Copyright 2024 DecisionPoint.com

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.

Helpful DecisionPoint Links:

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking

Bear Market Rules

ens Gold’s Advance.

Despite its position as a luxury automaker synonymous with prestige and performance, Ferrari N.V. (RACE) may be showing signs of a near-term downturn. Recent price action, coupled with stretched valuations and slowing shipment trends, suggests that RACE may face potential downside.

By incorporating both technical and fundamental analysis, we can see a compelling risk/reward setup for a bearish trade. The best part? This opportunity was identified automatically by the OptionsPlay Strategy Center within StockCharts.com, showcasing how you can effortlessly discover trades like this on your own.

Technical Analysis

From a technical perspective, the chart reveals a concerning pattern:

• Broken Support: After breaking below $460 support in early November, RACE has rallied back to retest this level as resistance, providing a favorable risk/reward for bearish exposure.
• Underperformance: Its underperformance relative to the S&P 500 with negative momentum further reinforces the case for downside toward the $400 support level.

FIGURE 1. DAILY CHART OF FERRARI NV. The stock has broken support and is underperforming relative to the S&P 500. Chart source: StockCharts.com. For educational purposes.

Fundamental Analysis

RACE’s valuation appears lofty, given its modest growth profile:

• High Valuation, Moderate Growth: Trading at 47x forward earnings, RACE commands a substantial 490% premium to the industry. Yet expected revenue growth of only 9% and EPS growth of 12% offer limited justification for such a rich multiple.
• Margins and Premium Pricing: To its credit, Ferrari boasts a best-in-class net margin of 22%; however, even premium margins fall short of supporting the current multiple without correspondingly robust growth.

Recent quarterly results highlight the concerning picture. Although Q3 2024 saw net revenues increase by 6.5, shipments declined by 76 units year-over-year, with notable weaknesses in key regions like China, Hong Kong, and Taiwan. Rising SG&A expenses—driven by digital initiatives and brand investments—also weigh on near-term profitability. While Ferrari’s emphasis on hybrids and personalization points toward innovation and resilience, the current fundamentals do not convincingly justify its elevated valuation.

Options Strategy

Given the bearish timing and valuation concerns, a put vertical spread offers a defined-risk way to position for potential downside. The OptionsPlay Strategy Center suggests buying the February $460/$410 Put Vertical at a $18.30 debit:

• Buy: February $460 Put @ $24.30
• Sell: February $410 Put @ $6.00
• Net Debit: $18.30 per share or $1,830 total per contract

FIGURE 2. BUYING A PUT VERTICAL SPREAD IN FERRARI NV. Here you see the strategy details of buying a Feb. 21, 2025 $460/$410 put vertical.Image source: OptionsPlay Strategy Center in StockCharts.com. For educational purposes.

This strategy:

• Maximum Potential Risk: $1,830
• Maximum Potential Reward: $3,165
• Breakeven Point: $441.65
• Probability of Profit: ~43%

If RACE remains under pressure and trades below $441.65 by February 21, 2025, this strategy stands to benefit, offering an attractive risk-to-reward profile for bearish traders.

Unlock Real-Time Trade Ideas with OptionsPlay Strategy Center

This bearish opportunity on RACE emerged within seconds, courtesy of the OptionsPlay Strategy Center on StockCharts.com. By employing its Bearish Trend Following scan, the platform identified RACE as a candidate, then structured an optimal options trade to match the bearish thesis—no lengthy research required.

FIGURE 3. FERRARI NV WAS A CANDIDATE UNDER THE BEARISH TREND FOLLOWING SCAN.

Image source: OptionsPlay Strategy Center in StockCharts.com.

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Stocks can move fast, like the speed of an arrow flying through the air. And if you don’t monitor your charts, you can easily miss a trading opportunity.

Last week, I wrote about CSCO stock, one of the stocks filtered in my StockCharts Technical Rank (SCTR) scan. At the time, I was waiting for CSCO’s stock price to pull back to its 21-day exponential moving average (EMA). Well, it happened a lot quicker than I anticipated.

It’s good that I go through all my ChartLists every trading day. The pullback also coincided with the upward-sloping trendline. It was accompanied by declining relative performance against the Nasdaq Composite ($COMPQ) and a decline in the value of the full stochastic oscillator.

Is this a classic buy-the-dip moment? To answer the question, let’s look at the daily chart of CSCO.

FIGURE 1. DAILY CHART OF CSCO STOCK. The uptrend is still in play, making the pullback to the 21-day EMA an attractive entry point.Chart source: StockCharts.com. For educational purposes.

The uptrend broke slightly to the downside, but the support from the 21-day EMA was strong. Thursday’s price action indicated a reversal is possible.

The stochastic oscillator is approaching the 50 level and is starting to turn higher. The last two times CSCO’s stock price pulled back to the 21-day EMA, the oscillator turned up at around the 50 level. I’ll be watching to see if a similar scenario unfolds this time.

CSCO’s price action looks attractive. I’m ready to open a long trade in CSCO when the %K line crosses over the %D in the stochastic oscillator. CSCO’s stock price hit an all-time high in early December, so a pullback is a prime time to open a long position if all your criteria are met.

The Game Plan

Cisco Systems may not be a direct AI play, but it is a networking company, and the stock could benefit from tech companies’ increased AI spending. So it’s not too far-fetched to anticipate CSCO’s stock price to ride along with the AI wave.

Thursday’s price action does not yet confirm a bullish upswing, but I’ll watch this chart closely. It’s an opportunity I don’t want to miss.

Even if it looks like a near-perfect setup to buy on the dip, there’s still a chance the trade could go against me. If I enter a position at around $59 and the trade goes south, the 50-day SMA would be my maximum stop loss.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

Analyzing the market at the end of the trading day can offer a calmer, less volatile environment, allowing you to think more clearly when scanning for market opportunities. The StockCharts Technical Rank (SCTR) Report is usually a good place to start, as it lists top-performing stocks in different phases of their respective trends.

As Wednesday’s market session approached its close, I checked the SCTR Report on my Dashboard. While some stocks have consistently cycled through the top 10, others, like the fintech company SoFi Technologies, Inc. (SOFI), are relative newcomers.

FIGURE 1. SCTR REPORT FOR WEDNESDAY DECEMBER 11, 2024. SOFI is sixth from the top with a SCTR score of 99.3.Image source: StockCharts.com. For educational purposes.

SOFI is a fintech company founded in 2011. Its appeal lies in its rapid growth (and growth potential), user-friendly digital platform, and focus on younger, tech-savvy customers. Since going public in 2021, the company has positioned itself as a disruptor in traditional banking. It’s had quite a volatile run up and down, but now seems to be regaining favor among investors.

Stalling at a Congestion Range

Looking at SOFI’s weekly chart, you can see where the trend has stalled. This underscores the importance of viewing long-term price action for key levels, particularly where heavy buying and selling has occurred. Price tends to react strongly to these historical levels, leading to the notion that the market has a memory.

FIGURE 2. WEEKLY CHART OF SOFI. Bullish investors take profit at a key congestion level dating back to 2021.Chart source: StockCharts.com. For educational purposes.

You can see that the price stalled at a range where concentrated activity occurred in 2021 (between $15 and $17). Fast-forward to 2024, and buyers are taking profits at this level (see blue rectangle), perhaps anticipating that this historical congestion range might serve as a resistance zone.

If price breaks above this level, the swing highs at the $25 range and $28, SOFI’s all-time high, can serve as longer-term profit targets. But what’s the likelihood of price breaking above the current swing high point of $16.60 in the near term? Let’s look at the daily chart.

FIGURE 3. DAILY CHART OF SOFI. Can momentum fuel an uptrend following the bounce?Chart source: StockCharts.com. For educational purposes.

Note the SCTR score as it moved above the 80 line, which I consider a bullish threshold. In particular, note how it coincides with SOFI breaking above a ‘local’ high following a long basing period (see dotted magenta line).

Next, observe how price, following a strong advance, had pulled back and is currently bouncing off the middle Bollinger Band.

Is there enough momentum to support the bounce and a continuation of the trend?  If you look at previous bounces, highlighted by the magenta rectangles, you can see how most bullish reversals coincided with a Stochastic Oscillator reading below (or near) the 20 thresholds, signaling an ‘oversold’ condition. The current bounce is barely above the 50-line, and this tells you that the current momentum may be weaker compared to previous reversals. While this doesn’t guarantee SOFI is going to dip in the near term, it suggests you should be cautious and look for additional confirmation, such as stronger volume or other indicators signaling bullish conditions, before assuming the trend will persist.

If, for any reason, you already went long the stock near the current price, you can place a stop loss below the closest consecutive swing lows at $14.80 and $13.00 to manage potential losses if you’re currently long.

If you haven’t entered a long position yet and are looking to buy, it’s a general principle to go long upon the breakout using the most current swing high as your entry point. However, that setup can change if SOFI pulls back further and forms a lower swing high point.

The Game Plan

Here’s your actionable game plan for SOFI:

1. Add SOFI to your ChartList. This will help you keep a close eye on SOFI’s price action. Note the key levels of interest, including at $16.60 (current swing high), at $14.80 and $13.00 (stop loss levels), and at $25 and $28 (potential long-term profit targets).
2. Plan your entry strategy. If you’re not already in the trade, wait for a breakout above the $16.60 swing high for a potential entry point. Alternatively, if the stock pulls back further, monitor for a lower swing high to adjust your strategy.
3. Monitor momentum and volume. Use indicators like the Stochastic Oscillator or any other of your choosing to confirm the strength of the current price action. If price pulls back further, look for an oversold Stochastic reading (an ideal scenario) and/or a decisive volume spike to validate bullish momentum.
4. Set your stops and targets. Tighten your risk management by setting stop-loss orders at $14.80 and $13.00. For potential upside, aim for $25 and $28 as long-term targets if the breakout sustains.

At the Close

The SCTR Report highlighted SOFI as a compelling opportunity, but its current price action requires careful monitoring. By adding SOFI to your ChartList and following the outlined setup, you can develop your own approach to SOFI that capitalizes on its potential upside while protecting yourself against the downside risks.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.