Hey, Ross here:
It’s almost a wrap for the first trading week of 2023. Here’s a trade idea to consider.
Chart of the Day
It is important not to get emotional about stocks. That’s easier said than done, but we need to remain flexible and be willing to flip from bullish to bearish when the signs are there.
Cal-Maine Foods (CALM) is a perfect example of that.
It has a huge base, signs of institutional buying, high relative strength, big sales and earnings – basically everything we want to see for a breakout buy.
But last Thursday, everything fell apart. CALM was down 14.5% on the day on 6X its average trading volume. In other words, the big boys sold hard.
Unsurprisingly, the stock found support at $52 where it has done so three other times over the last several months.
This is the line in the sand. If it breaks down below $52, which would also be a break of its 200-day moving average, look out below.
On a stock like this, I would want to see a decisive move lower on heavy volume. My stop loss would be the high of the session on the day it breaks down.
Insight of the Day
Thinking long term is generally good advice. But in this market, thinking short-term is more effective.
We’ve all heard about the benefits of long-term thinking. And hey – it’s great advice that applies in many areas of life.
But in this market – that’s not something I want to follow. It’s simply too difficult to gauge what’s going to happen that far out.
Just look at what happened yesterday. After months of news about massive tech layoffs, yesterday’s private payrolls report showed that the labor market was still running hot – which caused markets to fall, as it means the Fed may go harder in its fight on inflation.
No, in this market, I want to think short-term… to see where it’s moving everyday and pivot accordingly. The example of CALM shows just how fast things can change.
And here’s the thing – just because we’re thinking short-term doesn’t mean we can’t pocket big gains. This is a great example of that.
Embrace the surge,
Editor, Stock Surge Daily