August 1, 2021

Amazon.com's (AMZN) disappointing Thursday earnings release pressured stocks on Friday, but volume was summer-lite while price remained above the 20 ema.

It has been mentioned here that technology stocks have been mostly out of favor with investors, and that niche areas in the growth sector away from tech would be sought out as actionable issues. One of these is discussed below as an actionable name.

In February, we had some success with cyclical groups such as the oil & gas explorers and metal ores. It would seem that sooner or later cyclical issues would again present opportunity in an economy with solid growth. Indeed, this past week a few cyclical groups asserted themselves, including the semiconductors, steels, and homebuilders. 

Among the semis, KLA (KLAC), Macom Tech Solution Holding (MTSI),  Power Integrations (POWI), and Sitime (SITM) have the most constructive patterns, though none are actionable at present. Rambus (RMBS) sets up for very aggressive players and is discussed below.

Advanced Micro Devices (AMD), noted here in Wednesday's report, tacked on another 8% on volume Thursday and Friday.

Among the steels, Cleveland-Cliffs (CLF) sets up in a seven-week consolidation, however the last three breakouts failed. We will see if it can follow through this time, and then look to enter on a pullback. Nucor (NUE) acts best in the group and sits 6% below its pivot. U.S. Steel (X), 8% from its pivot, is another that is worth watching.

Among the homebuildersTri Pointe Homes (TPH) shows the best relative strength in the last two weeks, but is 8% from its pattern high and is not actionable. Worth watching.

While not actionable, Li Auto (LI) is worth watching. Following Tuesday's 14% drop, it rallied 16% Wednesday and 9% Friday.

The following names are believed to be the most attractive for our style of momentum-based speculation. To enlarge a chart, please click on it.

Molina Healthcare (MOH)

Rambus (RMBS)

Trupanion (TRUP)

In sum, with growth stock breakouts in technology off the table, the focus will be on a few of the cyclical groups that have just begun to perk up. These are not expected to rival the gains of growth stocks, but they may be of interest to some speculators. At present, most of these need further work on their patterns. Niche growth stocks away from tech will continue to be sought. System R setups, if available, may present another opportunity.

Let's keep in mind that this is a period of the year when volume is usually light and price action more muted.

Kevin Marder

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