[Unlocked] Stocks Set To "Squeeze Out" Further Gains

JC Parets
May 27, 2020

We remain in an environment where there are stocks going up, stocks going down, and many stocks doing a whole lot of nothing.

We're being very selective before putting money to work and just reiterated a few short setups in the Financial Services Sector.

In this post, we're focused on stocks exhibiting specific conditions that create a reward/risk opportunity that is ridiculously skewed in our favor.

Let's look at beaten-down stocks exhibiting the bullish momentum divergence and failed breakdown type setups that create an environment where stocks can really squeeze to the upside. Prices break down below a key support level --- stopping out longs and suckering in shorts --- and then reverses quickly...forcing shorts to cover, longs that sold to get back in, and new lows who are witnessing this to pile on.

Click on chart to enlarge view. 

A great example of this is Birla Corp. Ltd., which recently broke down below support at 385 and has quickly reversed to start the week. As long as prices are above 385, then this squeeze thesis is intact and any weakness can be bought with a target near 800.

This also fits into our broader thesis surrounding Cement stocks, which continue to show a ton of relative strength as a group.

Eicher Motors, and several other Auto stocks, is trying to reclaim support as well. A breakout above 15,200 would signal the start of a new leg higher that could target its 2019 highs near 23,500.

Here's Tata Power getting back above support at 31. If prices are above this level, we can be long for a move back towards former support at 55.

Page Industries Ltd. continues to build on the initial setup we outlined in mid-April. If prices are above 16,600 then we can be long and buying weakness for a move back towards the top of its range at 26,100.

Jindal Steel and Power has successfully reclaimed support at 91. As long as prices are above that level, we can be long with a target near 190.

These stocks all have a ton of momentum behind them, but most importantly, our risk is very well-defined which is essential when trading stocks on an absolute basis in this environment.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team

Filed Under: