After a shaky September for the stock market, October is off to a strong start.
The S&P 500 index is up a bit more than 2% so far this month and is now only about 3% off of its all-time high set in early September.
The Dow Jones is outperforming this month, while the Nasdaq 100 technology stocks and Russell 2000 small-caps are lagging.
But while the Russell is falling behind a bit, it is the only major index currently trading above both its 50- and 200-day moving averages.
Its moving averages are also tightening up and converging as the index continues its sideways consolidation. As regular readers know, I like to see prices compress and get very tight.
That usually indicates that a big move is coming. Whether that move is to the upside or downside is hard to say right now.
I would like to see the other major indexes rise back above their 50-day moving averages before getting too bullish, but we are not seeing any major indications that another selloff is approaching.
Yes, market breadth is not as strong as it could be. But the CBOE S&P 500 Volatility Index (VIX), known as the market’s fear gauge, is back below the 20 level again.
That’s a fairly good indication that traders aren’t expecting a major correction, at least in the near term.
However, we did see some big distribution days last week on high volume. If that trend returns and the indexes take out their September lows, I’ll likely go to cash.
For now, we’ll continue to rely on my Stock Surge Indicator (SSI) readings to find the stocks that have the strength to move higher even in an uncertain market environment.
So, with that in mind, let’s get in to this week’s Watchlist stocks.
Entravision Communications Corporation
Entravision Communications Corporation (EVC) is a Santa Monica, California-based broadcasting and communication services company. The company operates television, radio and digital business segments, with 54 television stations and 48 Spanish-language radio stations.
It also offers digital advertising solutions and operates Entravision Solutions, which sells ads and syndicate radio programming.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my Stock Surge Indicator (SSI):
- Surge score: 98/100
- % Above 52-wk low: 331%
- MFI reading: 58
- Sales growth: +295%
- Triple momentum: yes
From a technical perspective, EVC has made a series of higher highs and higher lows for the last five months.
The stock is up big, and traders finally have a low risk point from which to enter.
Sales and earnings have grown by triple digits in each of the last three quarters, and analysts are projecting further growth through 2022.
A pivot has formed at $7.73. And I’ll be using the Sept. 29 low as a stop.
Candel Therapeutics, Inc.
Candel Therapeutics, Inc. (CADL), formerly known as Advantagene, Inc., is a clinical-stage biopharmaceutical company that focuses on developing and commercializing cancer immunotherapy drugs.
Its product pipeline currently includes drugs for the treatment of prostate and pancreatic cancers as well as those that specifically target tumor cells while minimizing harmful effects on healthy tissue.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my SSI:
- Surge score: 93/100
- % Above 52-wk low: 92.4%
- MFI reading: 70
- Sales growth: +0%
- Triple momentum: N/A
Candel is a recent initial public offering (IPO) forming its first base.
As an early-stage biotech, CADL has no sales or earnings to evaluate, so we are putting a large emphasis on the price action.
IPOs have been hot this year. Several have delivered huge gains in the opening weeks and months, and Candel could easily be the next big winner.
The entry and exit points noted on the chart represent my maximum risk of 10% risk on the trade.
However, if you want to give it a little more room, you could work a stop beneath last Monday’s low at $9.40.
Houghton Mifflin Harcourt Company
Houghton Mifflin Harcourt Company (HMHC) is the Boston, Massachusetts-based learning company that was founded all the way back in 1832.
It offers educational products like textbooks and digital courseware as well as printed and digital fiction and non-fiction consumer books, dictionaries and reference works to schools, libraries and businesses.
Here’s how the chart is setting up:
And here’s how the stock is setting up with my SSI:
- Surge score: 99/100
- % Above 52-wk low: 551%
- MFI reading: 64
- Sales growth: +43%
- Triple momentum: yes
With a Surge Score of 99/100, HMHC is the Lamborghini of stocks. It is in the elite top 1% of stocks outperforming all others in the market.
After an earnings gap higher in early August, shares have been consolidating in the textbook compression pattern with clear resistance.
Note the volume over the last two weeks. Down days saw very little volume while positive days experienced much higher volume.
This is a good sign, as it is likely indicative of further institutional accumulation. In other words, the big players are still buying it.
I will be looking to buy HMHC on a breakout to new high ground.
Embrace the Surge,
