Today, I want to take a look at the S&P 500 to get a better idea of where the index sits following last week’s bounce.
I’ll also cover each of the stocks from this week’s Watchlist and let you know how they’ve been shaping up since Monday.
First off, the S&P experienced a bounce of nearly 10% off its lows last week. And in just three trading days from May 25-27, the index jumped 5.8%.
It was great to see that follow-through move to the upside, but unfortunately it hasn’t done much to change the technical picture just yet.
For example, even with the rally, the S&P is only back to the resistance level at 4,166 that I identified in our May 26 article, Watch These Levels When the Market Makes a Move.
The index attempted to break through the 4,166 level on May 31 and even got up to about 4,200 in the futures market, but it was ultimately rejected by the end of the day.
This is the market’s first test from a technical perspective.
If it can get above this level, the next levels to watch will be the 50-day moving average (red line) at 4,251 followed by horizontal resistance in the 4,300 area.
Aris on the Move
Now, while the benchmark stock index may be stalling at resistance, some of this week’s Watchlist stocks are on the move already.
First up is Aris Water Solutions, Inc. (ARIS). Here, we were looking for a strong move above $19.50 on decent volume, with a stop at $18.25.
As I was writing up this idea on Friday morning, the stock hadn’t made a move yet. But by the end of the day, the stock was up 9.6% to $20.73 on strong volume.
If you took this trade when the markets opened on Tuesday, you may be down a bit. But I still like this trade now that the breakout has happened.
Just be sure to keep your stops in place and raise them as you need to.
Energy Ready to Rally
Next up is United States Oil Fund, LP (USO), the exchange-traded fund (ETF) that tracks the price of crude oil.
For this idea, we were looking for a strong move higher on a spike in daily trading volume, with a stop loss about 7% below the entry.
USO was already peaking above resistance when I published this idea on Monday morning.
But it got a big boost on Tuesday as it was reported that parts of China will begin to reopen from their recent COVID lockdowns.
USO opened about 3% higher but faded throughout the day and was flat in yesterday’s session.
However, I still like this idea and think that USO could make a strong run after breaking above the $83 resistance level.
If you took this trade, keep holding while keeping your 7% stop loss in place.
Waiting for the Entry
Lastly, we have Northrop Grumman Corporation (NOC). For this idea, I explained that I would consider buying if NOC trades above $476 on above-average volume.
If triggered, my stop loss would be at $441 for a total risk of about 7%.
As you can see in the chart above, we have not seen a breakout in NOC yet. The stock is still consolidating below resistance around $478.
However, it is holding nicely above its 50-day moving average (red line), and we saw a nice green volume bar form on Tuesday as the stock dipped and then recovered throughout the day.
I still like this idea, so keep an eye on the $476 level for a possible breakout in the coming days or weeks.
Looking for the Bottom
Until we find a real bottom, we need to be careful about which long trades we take and where we enter them.
Unfortunately, we won’t know when the real market bottom is in until we start to see massive buying by institutions.
These are hedge funds, pension funds, endowments and other trillion-dollar organizations that are eventually going to start scooping up stocks at value levels.
And when they put their money to work, following their lead can pay off big time.
This is exactly what I focus on in my premium Stealth Trades research service.
Embrace the surge,
Editor, Stock Surge Daily