Last week, the S&P 500 traded mostly sideways despite outsized gains in several heavyweight FAANMG stocks. In fact, most of the underlying sectors in this Index were down over 1% for the week while investors sorted through news, such as a potential shift in the Federal Reserve's tapering timeline due to high inflation.
There were pockets of outperformance, however, led by analysts' upgrades and management shakeups that pushed select stocks into compelling positions.
WEEKLY CHART OF PLUG POWER, INC. (PLUG)
First up is hydrogen fuel-cell tech company Plug Power (PLUG), which popped today after Morgan Stanley boosted their price target for the company by 51%. Earlier in the week, Citigroup had a similarly large price target upgrade for the company.
Plug Power plans to make hydrogen-powered heavy-duty trucks while also manufacturing and distributing the hydrogen gas required. This, in turn, is expected to drive sales into 2030. PLUG was a big winner for me following its post-election rally from November 2020 rally into February 2021, and the stock has been on my Watch List.
The weekly chart above looks particularly interesting, with the MACD just entering positive territory. The RSI is also in a positive position, with a Golden Cross formation taking place last week. Weekly charts provide insight into the potential for longer-term moves; a concerted move into other alternative energy stocks would give me additional confidence in PLUG.
DAILY CHART OF MICRON TECHNOLOGY (MU)
Lagging Technology company Micron (MU) reversed its downtrend on Friday after being added to Wall Street firm Evercore's top stock pick list. The company lost share value after DRAM pricing flattened out in May of this year, which, in turn, reduced the revenue outlook for the company.
While MU is not expected to turn profitable until the 2nd quarter of next year, the market's predisposition to look out two quarters when evaluating a stock has this analyst thinking a run up in MU's price is in the works. MU broke back above its 200-day moving average on volume and, while constructive, I'd need to see a more sustained move above this key area of resistance to confirm that an uptrend is in place.
DAILY CHART OF DOLLAR TREE, INC (DLTR)
Last up is Dollar Tree (DLTR), which soared to a new high this week after activist firm Mantle Ridge unveiled a $1.8 billion stake in the discount retailer. Excitement over the news stems from the fact that Mantle Ridge has a good track record and is known as a long term investor who focuses on a few investments at a time.
As you can see, DLTR gapped up on heavy volume into a multi-month base breakout and has since trended higher. A pullback to its 5-day moving average on its daily chart would be an ideal entry point as the stock continues to trend higher.
There were other strong areas of the market last week as well, which I'll be reviewing in detail in my MEM Edge Report on Sunday. This twice-weekly report provides alerts to high-growth stocks that are poised to outperform the broader markets. It also provides insights into sector and industry group rotation not seen elsewhere.
You can use this link here for a 4-week trial that includes immediate access to existing reports.
On this week's edition of StockCharts TV's The MEM Edge, I share how to trade stocks after they have big gaps up. I also review signals that a downtrend reversal has further upside potential, as well as small-cap stocks in bullish positions.
Mary Ellen McGonagle
President, MEM Investment Research