It is vitally important to watch which stocks are making highs when the market is making lows.
This is usually the next group of market leaders that can advance several hundred percent once the next bull market begins.
Chemical, shipping and energy stocks were the clear leaders in 2022. But their reign quickly came to an end.
Over the last two weeks, the Energy Select Sector SPDR Fund (XLE) is down 23%. Many leading shipping stocks have fallen 25%-30% each.
So… who are the new leaders?
Bullish Biotechs & Solar Stocks
So far, the new leaders all seem to be biotechnology companies.
The SPDR S&P Biotech ETF (XBI) rose over 12% last week…
And stocks like Meridian Bioscience, Inc. (VIVO), Chinook Therapeutics, Inc. (KDNY), Immunocore Holdings plc (IMCR), Allogene Therapeutics, Inc. (ALLO) and Vertex Pharmaceuticals Incorporated (VRTX) are all showing a lot of strength on increasing volume.
I am also seeing strength in several solar energy stocks…
Daqo New Energy Corp. (DQ), Enphase Energy, Inc. (ENPH), SolarEdge Technologies, Inc. (SEDG), JinkoSolar Holding Co., Ltd. (JKS) and a few others are beginning to set up as potential buys.
The general market, however, is still in no-man’s land. It has not yet shown enough strength to start heavily buying.
The indexes are also too far extended to safely enter a good short position.
Therefore, risk-averse traders might consider sitting out for the week until the market shows where it wants to go.
The Nasdaq index, represented below by the Invesco QQQ Trust (QQQ), is beginning to tighten up and coil before making its next move.
Which direction the market moves next remains to be seen, but I have enough confidence in this week’s Watchlist ideas to bring them to you today.
You’ll find two new long ideas and one new short idea added to the Watchlist below…
Chinook Therapeutics, Inc. (Long Idea)
Chinook Therapeutics, Inc. (KDNY) is a biotech stock coming out of a two-year base pattern.
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: 97/100
- % Above 52-wk low: 79%
- Sales growth: +671%
- Return on Equity: N/A
- Triple momentum: yes
The company has three drugs in its development pipeline, one of which is in Stage 3 clinical trials.
Good news from that trial could deliver a big surge in the share price.
KDNY has seen several weeks of big volume on its move to the highs. Consider buying the breakout with an 8% stop.
Immunocore Holdings plc (Long Idea)
Immunocore Holdings plc (IMCR) is another biotechnology stock showing a lot of strength.
Here’s how the chart is setting up…
And here’s how the stock is setting up with my SSI…
- Surge score: 96/100
- % Above 52-wk low: 102%
- Sales growth: +159%
- Return on Equity: N/A
- Triple momentum: yes
IMCR just completed a beautiful base pattern with volatility compressing as pullbacks shallowed from left to right – exactly the kind of price action we like to see.
Consider buying this stock here around the $37 mark with an 8% stop loss.
ZIM Integrated Shipping Services Ltd. (Short Idea)
I added ZIM Integrated Shipping Services Ltd. (ZIM) to the Watchlist as a short last week, and it is finally hitting the entry trigger.
Here’s how the chart is setting up…
And here’s how the stock is setting up with my SSI…
- Surge score: 90/100
- % Above 52-wk low: 96%
- Sales growth: +113%
- Return on Equity: 191%
- Triple momentum: no
The stock was a market leader in 2022 as marine shipping companies have been able to charge insane rates due to slowdowns in the supply chain.
Earnings surged roughly 10-fold after the pandemic and the stock has done the same.
But President Biden basically declared war on ZIM and the other handful of companies that control the bulk of cargo shipments from overseas thanks to what the White House believes is “price gouging.”
After an 803% move higher in 2021 and early 2022, ZIM has finally started rolling over.
Shares have seen heavy selling volume over the last few weeks, and the stock is now resting on its 200-day moving average for the first time ever.
I would consider selling ZIM short with a buy stop at $52 for protection.
Waiting for the Bottom
Clearly, certain groups of stocks are showing that a potential short-term bottoming process may be underway.
But as noted above, unless we start to see massive buying by institutions, we won’t know for sure that the real bottom is in.
I’m talking about hedge funds, pension funds, endowments and other trillion-dollar organizations that are eventually going to start scooping up stocks at value levels.
And when they put their money to work, following their lead can pay off big time.
This is exactly what I focus on in my premium Stealth Trades research service.
So, if you’re interested in giving it a try, click here now to view my latest presentation.
Embrace the surge,
Ross Givens
Editor, Stock Surge Daily
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