The TML Talk | February 5th, 2025

Market Overview

• Indexes and General Market Trend:
  • The NASDAQ has shown resilience by closing above key moving averages after a shakeout, indicating strong buying interest despite some of the earnings and tech sector news.
  • The Dow is outperforming due to less exposure to the affected tech stocks, suggesting a slight shift towards ‘industrials’.
  • The S&P 500 has been a mixed bag but is generally holding up, with broader market support.
  • The Russell 2000 remains the laggard but has potential for recovery if leadership in other indices continues.
• Current Market Status:
  • The market is navigating through earnings season, with tech stocks in focus, alongside industry group rotation into software, industrials, and biotechnology.
  • Leadership is broadening, with software leading, some internet stocks performing well, and semiconductors showing signs of recovery alongside other industries.

Key Lessons & Quotes

• “Leadership never really broke down when the market has distribution piling up. I’ve seen maybe seven to nine distribution days, but if I don’t see setups drying up or traditional leaders in constructive bases, then I worry. But that wasn’t the case here; even with distribution, the market didn’t push me out like it does when you can’t find any setups, where the best long setups become inverse ETFs, which is a bit of a joke.”
• “The biotech group shows signs of healthy rotation. I didn’t finish sorting through all of it, but my guess is if I had gone through another hundred names, the list would’ve doubled. A giant group like this can work for a while, depending on what’s hot within it. Sometimes it’s the bigger companies versus the smaller ones, or all the stocks focused on genomics, and then they get extended, which leads to different rotations within the broader healthcare sector.”
• “It’s (ZM) not your classical CANSLIM, but to me, this is a mixture of Bill O’Neil and Stan Weinstein’s approaches. I’m keeping an eye on it (ZM) because when certain stocks treat you well, like Tesla and Zoom did for me in 2020, you develop an affinity for them. I know they can’t be mad at me for joking about it, but that’s part of why these stocks are on my watch list.”

Actionable Takeaways

• Focus on Market Leadership: Observe how market leaders behave when distribution builds. If they remain in constructive bases, it’s a sign of market health, indicating you don’t need to panic; these leaders can guide you through market noise.
• Manage Volatility with Position Sizing: In times of high market volatility, keep your positioning small. This approach allows you to navigate through the market’s volatility with less stress, ensuring you can live your life without being overly tied to market movements when the trend is not obvious.

Stock Mentions and Commentary

Software:

• $APP: Base building with earnings looming; avoid trading near the event unless volume confirms a breakout.
• $RBRK: Wide, loose action, but weekly and monthly charts suggest potential for explosive moves; look for volume on strength and support on weakness..
• $SNOW: Bullish on weekly, with relative strength leading price, indicating consolidation before a potential upward trend.
• $TEAM: Shows a cup pattern with moving averages aligning for a possible breakout; weekly action remains tight.
• $ZM: Early stage base formation, mixing O’Neil and Weinstein styles; watch for accumulation signs.
• $BILL: Tightly holding the 10-day moving average, buyable on strength.
• $DAVE: Strong action across all time frames, hard to ignore for potential buy points.

Internet:

• $GOOGL: Despite a gap down post-earnings, it’s holding key support. Watch for a recovery or new setup.
• $META: A powerhouse with 13 days of consecutive gains post-earnings, showing significant institutional accumulation.
• $FUBO: A lower-priced, highly liquid stock with a setup for those comfortable with such investments.
• $NFLX: Demonstrates strong performance while the market whips around, making higher highs and lows, suggesting a lack of sellers and potential for further gains.

Cruises:

• $RCL: Exhibits tight price action, suitable for traders preferring less volatility.
• $VIK: Strong post-IPO trend, consolidating near highs for potential growth.
• $CCL: Part of a healthy travel sector but with a less tight chart compared to $RCL.
• $NCLH: Similar to $CCL, part of the sector’s positive momentum but with a personality that might not suit all trading styles.

Biotech and Medical:

• $ARGX: High-priced with a setup near all-time highs, potential for a Green Line breakout.
• $ALNY: Also high-priced and in a constructive setup, showing potential growth.
• $NBIX: Trading near highs, indicating sector strength.
• $BNTX: Signs of accumulation, potentially leading in biotech.
• $ISRG: Not strictly biotech but medical equipment, showing rotation into higher-priced, more stable names.

Insurance:

• $LMND: Starting to work up from the bottom, watch for a big volume breakout through its declining tops line.
• $ROOT: As an insurance stock, worth monitoring for signs of rotation into the sector.

Other Key Stocks and ETFs:

• $RKLB: Highlighted for its near-perfect setup. Very liquid, with tight action suggesting it’s on the verge of a significant move if it breaks through resistance.
• $IBKR: Extended after earnings, making it challenging to find entry points. Patience is advised for a new setup.