The Gilmo Report

November 26, 2019

November 26, 2019 3:35 pm ET

A weekend announcement from China’s State Council stating that it would crack down on IP theft sent the market off to a strong start to the Thanksgiving Holiday week. The NASDAQ Composite Index charged 1.33% higher on much higher volume as techs responded smartly to the news. This was followed today by a smaller 0.23% gain on higher volume.



The steady stream of marginally positive “news” on U.S.-China Phase One trade talks has logically weighed on the precious metals. The SPDR Gold Shares (GLD) and the iShares Silver Trust (SLV) both dropped below their prior undercut & rally (U&R) lows at 137.80 and 15.83, respectively, but not by much, yesterday.

While the U&Rs technically failed, one may or may not be stopped out depending on whether one is allowing for 1-3% of downside porosity. I will allow for a small amount of porosity, maybe 1-2% at most, and both held within that range. GLD is back up to 137.74, six cents below its 137.80 U&R low.



Meanwhile, the iShares Silver Trust (SLV) quickly regained its prior 15.83 low today to close back in U&R territory. Thus, its U&R is back in force with a new U&R today as the stock shook out through the 15.83 low.



Kirkland Lake Gold (KL) announced a $3.68 billion buyout of Canadian gold miners Detour Gold Corp. on Monday before the open and was decimated. The stock gapped down to 42.46, about 10% below Friday’s price. If one owned the stock, that was an immediate stop-out, although I discussed it as a potential lower-risk entry at the 10-dma in my weekend report.

KL was extended prior to that, so disciplined investors would not be in the stock that high. Either way, the magnitude of the price break, -17.1%, was quite unusual. It’s normal for a stock to sell off when it announces it is buying another company, but it appears that the market did not like this deal at all.



Franco-Nevada (FNV) remains in good shape, thanks to the fact that it hasn’t decided to buy out any other companies, but it is not a miner. The company has rights to gold-producing streams so is not directly involved in the mining business, which I suppose removes any idea that they would ever consider buying a gold miner!

In any case, FNV held support at its 20-dema today, which keeps it in a lower-risk entry position using the 20-dema or the 50-dma as relatively tight selling guides. KL’s situation was something of a force majeure, but FNV continues to act constructively.



The allegedly positive China trade news pushed semiconductors up yesterday, with Applied Materials (AMAT) clearing its 20-dema before running into resistance at its 10-dma today. Technically, the stock has now filled its gap, which puts it in a lower-risk entry position right here using the 20-dema and the low of the gap-up rising window at 57.38 as a selling guide.

A breach of the 20-dema would, conversely, trigger AMAT as a short-sale at that point. Overall, the pattern is erratic and somewhat on the fence. Therefore, play this one as it lies, and as real-time price/volume evidence plays out.



Like AMAT, KLA-Tencor (KLAC) is sitting on the fence here as it finds resistance at its 50-dma but is still holding above the prior U&R low at 160.40 from October 31st. In this position, the U&R can still be considered to be in effect using 160.40 as a tight selling guide, but one can also view this as a short here using the 50-dma as a tight covering guide. Play it as it lies!



Advanced Micro Devices (AMD) dropped below its 10-dma, confirming my view that if one is truly interested in buying the stock in this extended position, then waiting for at least a pullback to the 20-dema strikes me as the most prudent approach.



Micron Technology (MU) was also bolstered by the weekend trade news, slashing back up through its 50-dma yesterday on higher volume. That brought it right up into the declining tops trendline it has formed since early November. It rolled over from there today but stopped at its 50-dma as volume declines.

MU is also on the fence here since it can be treated on the one hand as if it is in a lower-risk long entry position on the low-volume pullback to the 50-dma, using the line as a tight selling guide. Alternatively, it was already a short at the declining tops trend line, and a breach of the 50-dma would again trigger it as a short-sale at that point. 360-degrees, please.



Nvidia (NVDA) would have rewarded anyone who bought it along the 10-dma on Friday as volume dried up sharply. It gapped up yesterday on strong volume, but the move was a one-day wonder as no follow-through was forthcoming today. In this position, the 10-dma becomes near-term support as well as a reference for a potentially buyable pullback.



The semiconductor space featured some very interesting action among two stocks that were on my Earnings Watch List and which reported yesterday and this morning. Analog Devices (ADI) reported this morning before the bell and gapped down to 108.62. It shortly thereafter set a low at 107.51 and reversed back to the upside.

By the close, ADI had posted a massive-volume pocket pivot on a big outside reversal to the upside. This puts it in a buyable position using the 10-dma at 112.04 as a tight selling guide. Ambarella (AMBA), the other one on my Earnings Watch List that reported yesterday after the close, was an exactly opposite situation.

AMBA opened at 60.37, rallied to an intraday peak of 61.75 within the first few minutes of trade, and then split wide open from there. It eventually closed at 53.79, right near the intraday lows, on huge selling volume. In this position, I might look at rallies into the 20-dema as a potential short-sale entry, but the bottom line is that one had to try and hit this at the open.



ADI and AMBA illustrate the 360-degree nature of this market and of individual stock set-ups. When they opened for trade this morning, there was no way to know how they would end the day – all you could do was implement use of the five-minute 620-chart and then play them as they lay, so to speak, based on the real-time action. Two interesting post-earnings opportunities with a lot of high-velocity, high time-value price action, to be sure.

The Big-stock NASDAQ “Fearsome Foursome” for which I show a group chart below, remains on an alt-currency roll, so to speak. Apple (AAPL) has closed below its 10-dma for the first time since late September but remains in a strong uptrend. If I’m looking to buy the stock, I prefer to look for a more opportunistic pullback to the 20-dema. (AMZN) has finally decided to join the alt-currency party with a strong move yesterday through its 50-dma. If trying to short the stock at the 50-dma, one met with instant non-gratification. Now AMZN is just streaking for its 200-dma, and we’ll see what it looks like when it gets there.

Alphabet (GOOG) held above its 20-dema yesterday, but what is most striking about the stock is how little it has traveled since breaking out in late October. Try to contain your excitement as you ponder the fact that GOOG is a blistering 3.79% past its recent 165.55 new-high breakout point.

Microsoft (MSFT) posted a new high today and is still extended. As previously noted, I would prefer to take the more opportunistic approach here and wait for a pullback to the rapidly rising 20-dema, if I can get it and if I’m interested in owning the stock.



As I wrote over the weekend, “If the general market keeps rallying then look for Netflix (NFLX) to move higher.” Well, the general market has rallied and NFLX has moved higher as well. It is extended in this position, such that only pullbacks to the 10-dma at 302.83 would be your reference for lower-risk entries from here.



Facebook (FB) remains near its recent highs after last being buyable along the 20-dema and then the 10-dma over the past two weeks or so. In this position, I’m inclined to take the opportunistic approach and look for a pullback to the 20-dema as the lowest of the lower-risk entries, should that occur. Otherwise, I’m not interested in chasing it up here near the current highs.



Tesla’s (TSLA) 20-dema proved to be more resilient than then the allegedly indestructible windows of its new Cyber-Truck as the stock held the line on Friday and then gapped up yesterday on heavy volume. That move was helped by news that the company had received 200,000 pre-orders for the odd-looking electric vehicle, and it quickly gave way on an intraday basis.

TLSA ended yesterday near its intraday lows on a reversal off the intraday gap-up highs. It then retested the 20-dema again this morning and failed, closing just below the line. Volume was light so the action is not necessarily decisive.

While one could view this as a short-sale entry right here using the 20-dema as a tight covering guide, we should also watch for a possible rally back above the 20-dema. That would set up a moving-average undercut & rally (MAU&R) long entry using the line as a tight selling guide. A 360-degree situation that must be played according to the real-time evidence.



Disney (DIS) came close to its rapidly rising 10-dma yesterday before pushing higher again today. As I wrote over the weekend, investors might be re-evaluating DIS’ valuation relative to NFLX given that it makes more money than NFLX to begin with, and it is now venturing into a new area of potential growth in streaming entertainment.

Today’s gap-up to new highs came on heavy volume, but the stock is clearly extended at this point. Pullbacks to the 10-dma would be your nearest references for lower-risk entries from here.



My newest new-merchandise IPO ideas have continued to act very well. DataDog (DDOG) is having trouble holding new-high breakouts, but I don’t consider that an issue since I don’t view breakouts as optimal buy points. Yesterday’s new-high breakout attempt failed today as the stock pulled into the 10-dma and below the new-high breakout point.

Volume declined to -27.1% below average today, not dry enough to call it a VooDoo Day. Nevertheless, one can treat this as a lower-risk entry while using the 10-dma as a tight selling guide. If that doesn’t hold, then the more opportunistic entry at the 20-dema would potentially come into play, so play it as it lies.



Ping Identity (PING) is also the buyable gap-up low at 18.25, so the stock is still extended in this position. I would watch for pullbacks to the 10-dma at 19.45 as the most opportunistic entries from here. If one chose to buy the new-high breakout, then my suggestion is to keep your stop very tight since a 7-8% stop-loss on a breakout buy doesn’t strike me as an intelligent way to handle the stock in such an extended position.



Among my less new-merchandise, risen-from-the-dead IPO ideas, Lyft (LYFT) has been on a tear over the past several days since I pointed out the pocket pivots in the stock last week. It is further extended to the upside and certainly out of buying range. The whole move got going last week when the CEO stated that the company’s stock was undervalued.

While I have a tough time seeing a company that is going to lose $11.73 in 2019 and then $4.97 in 2020 as undervalued at $44 a share, you can’t argue with the move, which was presaged by a valid technical set-up, as I’ve discussed in recent reports. It is now running into resistance along the September highs and would only be buyable on constructive pullbacks to the 10-dma from here.



LYFT’s cousin, Uber (UBER) has also done its best to keep up, pushing higher over the past several days as well. As I wrote over the weekend, and blogged again today, UBER may be more of a short-sale target as it approaches the 50-dma after becoming a long target down at the 10-dma last week on a bottom-fishing pocket pivot (BFPP).

UBER reversed at the 50-dma in textbook fashion today as volume declines but came in at above average. In this position, I still like it more as a short as close to the 50-dma as possible while using the line as a tight covering guide.



Fastly (FSLY) reversed near the $25 price level yesterday but was fairly extended at that point anyway. That’s the type of move I will tend to sell into, and FSLY did in fact reverse in a big outside move that closed bearishly, below the 50-dma. I was looking for the stock to consolidate along the 50-dma, as I discussed over the weekend, but suddenly it has gotten a bit sloppy here as it closes back below the 10-dma and 20-dema.

If one is approaching stocks in true 360-degree form, then FSLY quite simply morphed into a short-sale target yesterday on the reversal. The long side of this ended in ugly fashion yesterday, but in this market, what often stops going up can quickly shift from a long target to a short one. 360-degrees, please!



Keysight Technologies (KEYS) reported earnings after the close today and as I write is trading up slightly just above 108 in the after-hours. The company beat estimates by 15 cents but guided in-line, so the after-hours action is a bit muted, so far.

We’ll see how this opens up tomorrow and whether any movement occurs that would present a long or short entry, depending on how it plays out.



Guidewire Software (GWRE) ie expected to report earnings next Thursday after the close. It remains on Earnings Watch for now.

RingCentral (RNG) posted a pocket pivot at its 10-dma after finding ready support at its 20-dema Friday. This would qualify as a lower-risk entry spot based on the pocket pivot, using the 10-dma as a tight selling guide.



DocuSign (DOCU) hasn’t given up on its gap-up breakout of last Thursday, posting a new closing high today. Volume, however, was quite light, and there isn’t much to do here anyway since the company is expected to report earnings on December 5th, two Thursdays from now. Therefore, DOCU remains on Earnings Watch for now.



Alteryx (AYX) has continued moving higher after Friday’s successful test of the 50-dma following the pocket pivot move through the line last Wednesday. Today’s action took the stock to a higher high on a pocket pivot volume signature. However, since AYX is extended from the 10-day line it is not an actionable pocket pivot.

AYX is extended in this position, but watch for constructive pullbacks to the 50-dma or the rapidly rising 10-dma, which is more like to come into play as it crosses above the 50-dma.



Momo (MOMO) reported earnings this morning before the open and went for a wild ride. It opened at 37.64 and then immediately plummeted to a low of 34.60 within the first ten minutes of trade. It then spent the rest of the day recovering back above its 50-dma, where it closed on heavy volume for the day.

It’s difficult to peg this as a long or a short right here. It certainly was a short at the open, but now MOMO is just a few cents below two prior lows in the pattern at 36.04 and 36.02. It closed today at 35.98, so there is always the possibility of a U&R long entry materializing here on any move back above 36.02, so would be something to watch for.



Alibaba (BABA) streaked higher today after a successful listing of its stock in Hong Kong overnight. The big move in the stock overnight fueled a big move today on very heavy volume. BABA is one of the few Chinese names working in this market, but the last lower-risk entry occurred at the 20-dema last week, as I discussed over the weekend. It is now extended.



For newer members: Please note that when I use the term “20-day moving average,” “20-day line,” or “20-dema” I am referring to the 20-day exponential moving average. I use four primary moving averages on my daily charts: a 10-day simple (the magenta line), 20-day exponential (the green line), 50-day simple (the blue line) and 200-day simple moving average (the red line). On rare occasions, I will also employ a 65-day exponential moving average (thin black line). In all cases I will mostly use the shorthand version of “10-dma,” “50-dma,” etc.

Things will likely slow down going into the Thursday Thanksgiving holiday, but you can never assume anything in this regard. I can recall several years ago, either in 2009 or 2010, where we had a big sell-off the day after Thanksgiving, which is an abbreviated trading session.

With the indexes somewhat extended on the upside, one has to be ready for anything as we push through the short holiday trading week and into the first week of December. Continue to operate in 360-degree fashion, and follow the set-ups, as they will lead you in the right direction, even if that direction isn’t the same for every stock. That is all.

Gil Morales

CEO and Principal, Gil Morales & Company, LLC
Managing Director and Principal, MoKa Investors, LLC
Managing Director and Principal, Virtue of Selfish Investing, LLC

At the time of this writing, of the stocks mentioned in this report, Gil Morales, MoKa Investors, LLC, Virtue of Selfish Investing, LLC, and/or Gil Morales & Company, LLC held a position in SLV, though positions are subject to change at any time and without notice.

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