Holy hot market breakout! The market breakout is heating up again, even though the indexes themselves showed little movement today. With risk assets firing up and strong performances across the board, we’re witnessing a full-on breakout. Let’s break down the market indexes, including the QQQ and the SPY, and dive into our top picks for day and swing trades.
Market Overview
Even with a quiet day on the QQQ, risk-on assets are roaring. The iShares Russell 2000 ETF (IWM), which represents small-cap stocks, has skyrocketed by 30 points in the last few days, demonstrating clear risk-on behavior in the market. Bitcoin also hit new highs, sending individual crypto stocks soaring. With strong price action across various sectors, this market is primed for trading opportunities.
- Bitcoin Breakout
Bitcoin has been on fire, breaking through resistance and making significant strides toward $100,000. This cryptocurrency has a low float, meaning the FOMO (fear of missing out) effect could continue to drive prices higher. However, it’s essential to remain cautious. Extended runs like these often experience sharp pullbacks. Watch for dips or potential rug pulls, which can signal new opportunities. - Risk-on Rotation
The rotation into risk-on assets has expanded into nearly all sectors, including crypto stocks like MARA and smaller companies across various industries. This rotation supports a “hot potato” effect, with money flowing from one asset to another, making this an ideal time to watch for short pullbacks before prices push higher again. - IPO Breakouts
Recent IPOs have also shown strength. For example, HIMS hit an IPO breakout, surging by 19%. This setup suggests potential for swing trades, especially if it can hold above IPO highs. Any slight pullbacks in this market are prime opportunities for buying, particularly in breakout scenarios like these.
Watchlist for Tomorrow
- UPST
UPST experienced a 5% dip today, offering a potential re-entry point. A pullback to around $70 could offer a strong buying opportunity. UPST has been on a powerful upward trajectory, making it an ideal candidate for quick day trades or swing trades if it holds above the $70 level. - AFRM
AFRM broke out by 23%, with recent upgrades and news catalysts adding to the momentum. After multiple tests at resistance, it finally cleared the level with significant volume. Look for potential buying opportunities on pullbacks, as this could continue running higher. - SQ
Square recently broke out and is now setting up a range trade. This setup resembles Affirm’s pattern and shows strong potential for sustained momentum. With earnings already out of the way, SQ might continue climbing higher, especially if it pulls back slightly. - Tesla (TSLA)
Tesla is holding up well in this hot market, though it’s extended and due for a potential pullback. Keep an eye on TSLA for signs of an exhaustion gap, as this could create opportunities for shorts. However, in this bullish environment, be cautious with short positions. - Coinbase (COIN)
Coinbase is on a tear alongside Bitcoin’s breakout. This high-momentum stock may see continued strength, especially if Bitcoin maintains its recent gains. However, given its extended run, any gap-ups could present shorting opportunities. COIN’s market cap is over $70 billion, so watch for weakness on any signs of exhaustion. - Other Notables: SE, SNOW, and LTHM
- SE: Setting up nicely for a $100 breakout. Keep an eye on this one for any signs of continuation.
- SNOW: Though thinly traded, SNOW has potential for a breakout. More suited for swing traders, but watch for strong setups.
- LAC: With Tesla’s strength, lithium stocks are heating up. LTHM is nearing a breakout level and could be poised for a rally.
Key Takeaways
- Risk-on market: Even with flat indexes, risk assets are driving the market. This is a bullish environment where capital rotates from sector to sector, providing consistent trading opportunities.
- High-Momentum IPOs and Earnings Plays: IPO breakouts and stocks with recent earnings surprises are leading the pack.
- Caution for Extended Names: Many stocks are running hot. While momentum is strong, overextended names could see quick pullbacks, offering re-entry points.
Final Thoughts
We’re in a rare market environment with high momentum across multiple sectors. This market breakout may have some legs. Stay focused on high-quality setups, particularly in names with strong earnings or breakout patterns. This is the time to remain agile, playing both intraday and swing setups, while keeping a close watch for potential rug pulls in extended stocks.
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