EarningsBeats.com Digest for November 8, 2021
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A Trifecta: Strong Earnings, A Breakout, and Asset Class Tailwinds
Small cap stocks became the latest asset class to break out when they finally cleared months of overhead price resistance to close at all-time highs on Wednesday and Friday. As more money flows into this area, it provides tailwinds necessary to carry leading small cap stocks higher. I wrote a Trading Places blog article on Sunday titled, "Small Caps Broke Out, But Which Small Caps Should We Consider". I'd encourage you to read it, if you haven't already, as it describes a bit about my "top down" approach I take to trading stocks. I indicated in that article that I'd discuss one small stock that's set to benefit from the inevitable tailwinds provided from such a breakout. Before I give you that one stock,
let me give you a bonus. I ran a scan of technology and industrial stocks included in the S&P 600 Small Cap Index with average trading volume > 200,000 shares and that hit a 52-week high on Friday. Here is a list of those:
From this group, it's worth pointing out that both semiconductors and truckers have been very strong of late, so that could influence trading options towards stocks in those industry groups. I'm going to stick with and feature a semiconductor stock - Axcelis Technologies (ACLS). After easily beating both revenue and earnings estimates last week, ACLS raised revenue and EPS guidance. Furthermore, it climbed all week on increasing volume with its
AD line soaring to new highs. I'd view a pullback as a buying opportunity. The following chart could be a poster child for a "leading stock in a leading industry group":
Check out the volume bars under the price chart. I've added a 50-day SMA of volume (blue line) and you can see that the actual volume all last week was well above average. ACLS looks like a very strong trading candidate to me, though a test of the rising 20-day EMA would provide the best short-term, reward-to-risk entry.
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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