Based on the way the scan results reacted to trading today, it was clear that we needed to consider shorts still. I had a large amount of shorting candidates arrive in the results versus the bullish scans. I think it best that we straddle the line right now as the market decides what it wants to do right now.
I picked the shorts based on poor performance, but primarily I like to find ones with lots of downside potential. I found two today that fit that bill. Crowdstrike (CRWD) has continued to look weak and if the market is going to continue with its weakness, it should keep heading lower. Pacira Pharma (PCRX) looks terrible right now and has plenty of downside potential should it continue to slide lower.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": CRWD (Short), DUOL, PAYX and PCRX (Short).
Runner-ups: DPZ, STE and FIS.
Diamond Mine Trading Room:
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Welcome to DecisionPoint Diamonds, wherein I highlight ten "Diamonds in the Rough" per week. These are selected from the results of my DecisionPoint Scans which search for stocks that could benefit from the trend and condition of the market. Remember, these are not recommendations to buy or sell, but are the most interesting of the stocks that surfaced in my scans. My objective is to save you the work of the initial, tedious culling process, but you need to apply your own analysis to see if these stocks pique your interest as well. There are no guaranteed winners here!
"Predefined Scans Triggered" are taken from StockCharts.com using the "Symbol Summary" option instead of a "SharpChart" on the workbench.
Stop levels are all rounded down.
CrowdStrike Holdings, Inc. (CRWD)
EARNINGS: 2024-11-26 (AMC)
CrowdStrike Holdings, Inc. provides cybersecurity products and services to stop breaches. It offers cloud-delivered protection across endpoints, cloud workloads, identity and data, and threat intelligence, managed security services, IT operations management, threat hunting, Zero Trust identity protection, and log management. CrowdStrike serves customers worldwide. The company was founded by George P. Kurtz, Gregg Marston, and Dmitri Alperovitch on November 7, 2011, and is headquartered in Austin, TX.
Predefined Scans Triggered: P&F Double Bottom Breakdown and Filled Black Candles.
CRWD is down -0.04% in after hours trading. We a sixth bearish candlestick formation with today's being filled black. That portends a decline tomorrow. Price went right up against overhead resistance and was turned away. It appears it will move down and test support again. The RSI is negative. The PMO has topped below the zero line and is nearing a Crossover SELL Signal. Stochastics are holding below 20, also a sign of weakness. Admittedly the industry group does look like it is getting ready to outperform the SPY, but CRWD is displaying weakness against both the SPY and the group. The upside stop on this short is set at 7.8% or $267.06.
As noted in the opening, downside potential is excellent. If it goes to the next line of support it would be an over 20% gain. The weekly RSI is negative and the weekly PMO is declining on a Crossover SELL Signal. We want the StockCharts Technical Rank (SCTR) to be as low as possible. It is far from the hot zone* and is taking up residence in the basement right now.
*If a stock is in the "hot zone" above 70, it implies that it is stronger than 70% of its universe (large-, mid-, small-caps and ETFs) primarily in the intermediate to long terms.
Duolingo Inc. (DUOL)
EARNINGS: 2024-11-07 (AMC)
Duolingo, Inc. is a language-learning website and mobile application, which engages in the development of a free language learning website and crowd sourced text translation platform. It offers Duolingo for Schools, a free, web-based tool that aims to make it easier for teachers to use the Duolingo platform in a structured learning environment, and English Test, an online, on-demand assessment of English proficiency. The company was founded by Luis von Ahn and Severin Hacker in 2011 and is headquartered in Pittsburgh, PA.
Predefined Scans Triggered: Filled Black Candles and P&F Double Top Breakout.
DUOL is unchanged in after hours trading. Today we did see a bearish filled black candlestick, but ultimately it was a day of unchanged price so I'm not too concerned. Yesterday saw a breakout and today it formed a higher high and higher low, holding the breakout. The RSI is positive and not overbought. The PMO has surged above the signal line suggesting price is ready to move higher after this prior period of consolidation. Stochastics are nearing territory above 80. Relative strength for the group is picking up a bit as noted above. DUOL is a clear outperforming stock against both the group and the SPY. The stop is set beneath support at 7.6% or $200.61.
The breakout looks good on the weekly chart as well. The weekly RSI is positive and not overbought. The weekly PMO is about to trigger a Crossover BUY Signal and the SCTR is very close to the hot zone above 70. One very nice characteristic of the chart is the positive OBV divergence.
Paychex, Inc. (PAYX)
EARNINGS: 2024-09-25 (BMO)
Paychex, Inc. provides human capital management solutions for payroll, human resources, insurance and retirement for small and medium-sized businesses. Its solutions include payroll services, hiring services, business insurance, time and attendance, employee benefits, finance and payments, human resources services and startup services. The company was founded by Blase Thomas Golisano in 1971 and is headquartered in Rochester, NY.
Predefined Scans Triggered: Moved Above Upper Price Channel, New CCI Buy Signals, P&F Double Top Breakout, P&F Triple Top Breakout, Moved Above Upper Keltner Channel and New 52-week Highs.
PAYX is up +0.02% in after hours trading. I like the breakout move coming out of a period of congestion. This caused the PMO to surge about the signal line. The RSI is admittedly overbought right now and I almost took it off the list, but it had one of the highest PMO values and it does look as if it will be able to hold that condition awhile longer. Stochastics just popped above 80. This is a good industry group right now based on rising relative strength. PAYX is outperforming both the SPY and the group. We don't need a very deep stop here. You could thin it out even more if you'd like. I've chosen to set it below the 50-day EMA at 6.3% or $125.67.
This is a good breakout to new 52-week highs. It put price above very strong resistance. The weekly RSI is positive and not overbought and the weekly PMO is rising on a Crossover BUY Signal above the zero line. The SCTR has just entered the hot zone above 70. Consider a 17% upside target to about $156.92.
Pacira Pharmaceuticals Inc. (PCRX)
EARNINGS: 2024-10-31 (AMC)
Pacira Biosciences, Inc. is a holding company, which engages in the provision of non-opioid pain management and regenerative health solutions to improve patients' journeys along the neural pain pathway. Its products include EXPAREL, iovera, and DepoFoam. The company was founded in December 2006 and is headquartered in Tampa, FL.
Predefined Scans Triggered: New 52-week Highs, P&F Double Top Breakout and P&F Triple Top Breakout.
PCRX is up +3.17% in after hours trading so you should be able to get a good entry on this short position. There is currently no visible support until price hits the August low which is about a 20%+ decline. The RSI is very negative and not yet oversold. The PMO looks particularly bearish as it has topped well below the zero line and is nearing a Crossover SELL Signal. Stochastics are now below 20. The industry group is performing well, but PCRX is a clear underperformer against both the group and the SPY. I've set the stop rather deeply due to the volatility of this stock of late. Based on after hours trading, that is probably wise. It is set at 8.2% or $12.16.
The stock has been on the skids for a couple of years now. The declining trend is intact. The weekly RSI is negative and not oversold. The weekly PMO is highly negative and falling further. The SCTR is in the basement, well outside the hot zone. We should see more downside.
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Current Market Outlook:
Market Environment: It is important to consider the odds for success by assessing the market tides. The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA)
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA)
Don't forget that as a "Diamonds" member, you have access to our "Under the Hood" curated ChartList on DecisionPoint.com. You'll find it under "Members Only" links on the left side on the Blogs and Links Page.
Here is the current chart:
Full Disclosure: I am 20% long, 0% short.
I'm required to disclose if I currently own a stock I mention and/or may buy/short it within the next 72 hours.
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NOTE: The stocks reported herein are from mechanical trading model scans that are based upon moving average relationships, momentum and volume. DecisionPoint analysis is then applied to get five selections from the scans. The selections given should prompt readers to do a chart review using their own analysis process. This letter is not a call for a specific action to buy, sell or short any of the stocks provided. There are NO sure things or guaranteed returns on the daily selection of "Diamonds in the Rough."
Regarding BUY/SELL Signals: The signal status reported herein is based upon mechanical trading model signals and crossovers. They define the implied bias of the price index/stock based upon moving average relationships and momentum, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
Helpful DecisionPoint Links:
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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