Third-quarter earnings season has officially kicked off here in the US, and so far traders are taking the results fairly well.
The big bank earnings we’ve seen so far have largely beaten estimates on the top and bottom lines, although there are still some issues under the surface, including weakness in loan growth and net interest margin.
As earnings season progresses, we could hear more about supply chain issues and cost challenges from companies, which could put a damper on investor enthusiasm.
But there was also some positive economic data this week that has been helping to push stocks higher.
For example, retail sales data for September came in ahead of expectations with a rise of 0.7% last month. That follows a revised gain of 0.9% in August.
There was also some positive news for the job market, as weekly jobless claims in the US dropped to a new pandemic-era low of 293,000. At the same time, continuing claims dropped to 2.59 million, which also beat estimates.
These numbers are still well above pre-pandemic levels, but they’re a step in the right direction.
What to Watch This Week
On the other hand, the International Monetary Fund cut its 2021 forecast for US gross domestic product (GDP) this week to 6% from 7% due to supply chain disruptions.
While that is still a very high reading, the pace of growth is clearly slowing as the US works its way out of the pandemic slump.
That hasn’t stopped the bulls from buying the market this week, though.
The technical picture for the major indexes has certainly improved since last week, with the S&P 500 and Dow Jones indexes trading back above their key 50-day moving averages.
The Nasdaq is still struggling to reclaim that level, but it is set to close higher this week by over 2% nonetheless.
And with the CBOE S&P 500 Volatility Index (VIX) — known as the market’s “fear gauge” — making a sharp reversal to the downside and now trading under the 16 level again, it certainly seems like the bulls are taking back control.
With that in mind, we have a number of great setups forming this week, so let’s dive right in.
Heritage-Crystal Clean, Inc.
Heritage-Crystal Clean, Inc. (HCCI) is an Elgin, Illinois-based waste management company. It provides parts cleaning, hazardous waste removal and used oil collection services to industrial and vehicle maintenance companies.
The environmental services part of the business performs containerized waste management, vacuum truck, antifreeze recycling as well as field services. The oil business segment collects used oil products, sells recycled fuel oil and re-refines used oil into lubricant and other base oil products.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my Stock Surge Indicator (SSI):
- Surge score: 85/100
- % Above 52-wk low: 109%
- MFI reading: 62
- Sales growth: +47%
- Triple momentum: yes
From a technical perspective, HCCI stock nearly doubled in the first half of the year before forming a large consolidation base as you can see in the weekly chart above.
After bouncing off its 200-day moving average line in mid-September, trading has become tight and limited to a 4.5% range.
This has provided a low-risk area from which to enter a new long should HCCI trade above $30.30.
Those looking for a longer-term swing trade could give this one a bit more room by placing a stop beneath the September low at $26.75.
Revolve Group, Inc.
Revolve Group, Inc. (RVLV) is a Cerritos, California-based online fashion retailer that aims to connect consumers and global fashion influencers.
The company’s platform carries trendy luxury brand apparel, shoes and accessories and works with social media influencers to build and promote those brands.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my Stock Surge Indicator (SSI):
- Surge score: 97/100
- % Above 52-wk low: 288%
- MFI reading: 48
- Sales growth: +60%
- Triple momentum: yes
With a 97/100 Surge Score, RVLV is clearly a top performer. Shares have more than tripled over the last year and have finally taken a breath.
Earnings were up by triple digits in each of the last four quarters, and institutions are piling in, with 179 funds owning the stock at the end of 2020. By last quarter, that number had grown to 403.
According to my wife, the online women’s fashion retailer is indeed popular. Accelerating sales growth seems to confirm her opinion.
I would like to see the stock price get even tighter with another shallower pullback. This would set up an even lower-risk entry point.
But I’ll be looking to buy a move above $71.10 whether it happens this week or some time in the near future.
Veritiv Corporation
Veritiv Corporation (VRTV) is the Atlanta, Geogia-based business-to-business supplier of packaging, publishing and hygiene products.
It offers value-added packaging products and services like custom packaging solutions, and it also sources and sells cleaning products like commercial cleaning chemicals, personal protective equipment and sanitary maintenance supplies.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my Stock Surge Indicator (SSI):
- Surge score: 99/100
- % Above 52-wk low: 605%
- MFI reading: 67
- Sales growth: +18%
- Triple momentum: yes
Veritiv has been an absolute monster this year. Shares doubled in March and then continued to press higher all the way through last week.
A series of tightening bases followed by clean breakouts has delivered a 6X return to patient investors.
The recent pattern of higher highs and higher lows despite shaky market conditions demonstrates the strength of this stock.
RVLV is the top-performing stock in its sector with a 99/100 surge score.
Each of the prior base breakouts was accompanied by high volume, so I’d like to see a volume spike if and when shares hit my $100.05 buy point.
Embrace the Surge,
Ross Givens
Editor, Stock Surge Daily
