US markets ended the year on a high note, to be sure.
The benchmark S&P 500 index broke above the 4,800 level last week for the first time ever.
It’s now approaching a 30% gain for the year.
And it’s a similar figure for the Nasdaq 100.
But zooming out to a wider range of smaller stocks, the Russell 2000 index is up only about half that amount for the year at 16.5%.
That’s still a respectable gain, and it’s been a great trading range over the past year with a lot of opportunities.
But it points back to what I’ve been telling you lately…
The performance of large-cap and mega-cap stocks is masking a stealth correction throughout much of the market.
Yes, there will be plenty of great trading opportunities in 2022… And I’ll be here alerting you to many of them.
But I continue to recommend cautious trading because I don’t want you to get complacent as we head into the new year.
With that in mind, let’s get right to this week’s Watchlist stocks…
Lee Enterprises, Inc.
Lee Enterprises, Inc. (LEE) is a small, $232 million publishing company that produces print and digital newspapers and provides advertising and marketing services.
After surging 119% in 22 days, I put LEE on the Watchlist last week.
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: 235%
- Sales growth: +1%
- Triple momentum: yes
It also met the criteria for a “high tight flag.”
Since then, the stock has stayed within its retracement zone, so I’m going to keep it on our list to see if it can break out higher.
Ideally, we want the stock to stay in the “flag” portion for two to three weeks or more.
This way we can make sure the profit-taking has been absorbed.
Typically, traders use the low of the retracement zone as where to place a stop loss.
But if price continues to tighten, you could use the swing low of the final retracement.
Alphabet Inc.
Alphabet Inc. (GOOGL) is the 1.9 trillion parent holding company for technology platforms Google, Android, YouTube and many other leading tech brands.
This is not a typical Stock Surge Daily pick, but the fact that a nearly $2 trillion company is still growing sales by 41% per quarter is mind-blowing.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my SSI:
- Surge score: 92/100
- % Above 52-wk low: 70%
- Sales growth: +41%
- Triple momentum: yes
The company grew profits by 99%, 189% and 82% in the last three quarters, respectively, showing there may be no limit to how big Google can become.
Shares have been consolidating for the last few months, and we now have a tight pivot range where we can buy to risk just 6% on the trade.
Driven Brands Holdings Inc.
Driven Brands Holdings Inc. (DRVN) is a $5.6 billion automotive services provider for retail and commercial customers.
It does paint and body work, repairs, oil changes and other general services, and it is also a distributor of various aftermarket auto parts.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my SSI:
- Surge score: 87/100
- % Above 52-wk low: 49%
- Sales growth: +39%
- Triple momentum: yes
As a stock, DRVN is a recent initial public offering (IPO) trying to complete its first base as a public company.
The stock tried to break out earlier this month, but it appears to be finding sellers near the $34 area where the stock peaked back in January.
If we can get through that area into new high ground, there is a good chance the stock will run higher.
Last week’s low needs to hold in order for this to remain a low-risk trade, however.
If the stock breaks down, I will wait for a new entry point.
Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
