Traders, based on the setups presenting forming for the upcoming week, I have divided the watchlist into two main sections: Mean Reversion and Continuation. While the overall environment remains exceptionally favorable for long swings and continuation, just like the trade I discussed in detail and walked through that I had in TSLA, with my Inside Access members, there’s no denying that there are several stocks close to a potential A+ reversion opportunity.
So, with many names on watch for the upcoming week, let’s get right into it.
Overbought Names on Watch for a Reversion
For a stock to meet my criteria for a mean reversion/pullback opportunity, several variables need to exist and be met. Similar to what was present in SMCI earlier in the year or more recently in MSTR. For example, I want to see the stock over 200% extended from its rising 200-day, anywhere from 6 – 10 ATRs extended from its 50-day, consecutive gaps, range expansion, and blowoff volume signaling exhaust. Several names are close to fitting that criteria coming into the week.
Soundhound AI (SOUN)
Former runner during the previous small-cap AI theme. It is up impressively in the month, over 160%, with a high short interest rate and optionable as well. Not coming into Monday expecting it to be a short, however it is beginning to meet the criteria for a potential reversion in the coming days.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Ideally, I’d like to see continued gaps and range expansion, along with elevated volume, to the high teens – $20, before setting up in one of many ways for a reversion trade. Remember, having the idea is one thing, but it all depends on the setup that presents itself, which will determine the grading I allocate it and the risk I put on.
Sympathy stock: BBAI
Palantir (PLTR)
Incredible run this quarter and YTD. Overall, I’ve done a great job avoiding the name on the short-side since it extended to $60 and began grinding higher. Now, however, it’s starting to extend with a gap and expansion on Friday, RSI approaching the 80s, and uptick in volume.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
It’s not quite there yet, but certainly one to watch closely in the coming days. Ideally, this has continuation over $80, going more vertical with further gaps and expansion. For me to get excited and focus up on the potential reversion, I’ll need to see it extended several ATRs further from Friday’s close, and move red with steady selling pressure and relative weakness to its sector and overall market.
Destiny Tech100 (DXYZ)
The fund, which holds an investment in SpaceX and recently reported a NAV of $5.32 per share of common stock, is up over 300% on the month and 600% YTD. Post-election, after topping out near $50 it became a popular and well-known short opportunity, given the premium to NAV it was trading.
With the stock trading at a whopping premium to its NAV, it might now be perceived by many as a ‘free-money’ short opp, which could be the fuel it needs to extend much further than one thinks, especially in this tape. Therefore, I am entirely putting my bias aside and relying completely on price action before looking to enter.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Ideally, this extends multiple ATRs higher and blows out stubborn short participants, along with volume exhaust, before fading off. This idea can form in several different setups if it materializes. But at the core of them, I’ll be looking for a significant character shift that includes outlier volume signaling shorts have exhausted, steady selling pressure, which might consist of the stock being unable to reclaim intraday or multi-day VWAP / a major support zone before breaking red, and previous days’ high, for example.
Names on Watch for Continuation
While the market continues to melt up, until the music stops, I will continue to identify and react to relatively strong names setup with favorable R: R for continuation.
Vistra (VST)
From last week’s watchlist, the name is still consolidating near 52-week highs, with contracting range and volume. Like last week’s thoughts and plan, I am still looking for a range breakout over $163. Importantly, I will need to see price hold above prior resistance and elevated RVOL to get long for a multi-day swing long.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
Disney (DIS)
Significant earnings move and now a steady contraction near its most recent pivot high and just over 5% away from its 52-week highs. If DIS can break above $117 and form an uptrend above its VWAP intraday, I’ll look to initiate a long versus the LOD, targeting a 1 ATR move toward $120 to take profits and begin trailing my position.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.
DoorDash (DASH)
Consolidating near 52-week highs and the $180 breakout level. If the stock can push above $180 and hold on to a breakout in volume, I’ll initiate a long versus the LOD initially and trail the stop near the $180 key area once the stock trades half an ATR above the $180 level. I plan on decreasing the position as it extends a full ATR above $180, and from there, my stop will be trailed by 1 ATR to the current price, targeting a move closer to the high $180s.
*Please note that the prices and other statistics on this page are hypothetical, and do not reflect the impact, if any, of certain market factors such as liquidity, slippage and commissions.