Small Caps Lead Up Session, Nasdaq Recovers Off Lows; Denbury, Scotts Miracle-Gro, CarMax In Focus | Summary and Q&A

TL;DR

Small cap stocks showed strong gains in a rebound, while the Nasdaq continued to struggle.

Key Insights

• 🙃 Small cap stocks, particularly the Russell 2000, showed strong gains and an upside reversal, indicating a potential rebound.
• 🔊 The S&P 500's test and hold of its 50-day moving average, along with higher volume, is considered a positive development.
• ⏳ The Nasdaq Composite continues to struggle, trading below its 50-day moving average and with lower volume, suggesting it may take more time to recover.
• 🫢 Denbury emerges as a breakout candidate in the oil and gas sector, displaying tight trading and strong demand for shares.
• 🍵 Scott's Miracle Grow shows potential as a breakout candidate with a cup-with-handle base and increasing relative strength.
• 😨 Carmax is an interesting stock to watch as it benefits from strong demand for used cars and prepares for its upcoming earnings report.
• 👶 Overall, market conditions remain uncertain, highlighting the importance of identifying new leaders and considering portfolio management strategies.

Transcript

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Questions & Answers

Q: Why did small cap stocks see a strong rebound?

Small cap stocks, particularly the Russell 2000, showed a strong rebound due to an upside reversal and heavy volume, indicating renewed interest and buying activity.

Q: Is the S&P 500's test of its 50-day moving average a positive development?

Yes, the S&P 500's test of its 50-day moving average with higher volume is considered a positive development as it shows support and accumulation in the index.

Q: Why is the Nasdaq Composite struggling?

The Nasdaq Composite is struggling due to continued trading below its 50-day moving average and lower volume, indicating a lack of buying interest. The index is still digesting gains from 2020 and may need more time to consolidate.

Q: What factors make Denbury a breakout candidate?

Denbury, an oil and gas producer, shows tight trading near its highs, holding above its 50-day moving average and the $40 level. It has strong annual earnings estimates and an accumulation distribution rating of A-, indicating strong demand for shares.

Q: What makes Scott's Miracle Grow a potential breakout candidate?

Scott's Miracle Grow is forming a cup-with-handle base with tight trading and support at the bottom of the base. The stock has a decent relative strength line and has been investing in the cannabis industry, a potential growth avenue.

Q: Why is Carmax an interesting stock to watch?

Carmax, a used car dealership, has been benefiting from strong demand for used cars amid production issues faced by car manufacturers. The stock has a relative strength rating of 74 and is forming a base with light volume during the pullback.

Q: What should be considered for a potential trade on Denbury?

For a potential trade on Denbury, it would be ideal to wait for a pullback to the 50-day moving average or more sideways movement above the $40 level to form a base. Waiting for a clearer entry point would be advisable.

Q: Can Carmax be a potential buy after its earnings report?

If Carmax has a positive reaction to its earnings report and its chart remains in the five percent buy zone, it could be a potential buy opportunity. Monitoring the chart and market conditions will help determine if it fits the criteria for a call option trade.

Summary & Key Takeaways

• Small caps, particularly the Russell 2000, experienced a strong upside reversal, showing resilience after recent losses.

• The S&P 500 made a positive development by testing and holding its 50-day moving average, with higher volume indicating some accumulation.

• The Nasdaq Composite closed above 13,000 but remained below its 50-day moving average with lower volume, indicating continued struggles.