Though I trade in and out of inverse ETFs to capture gains on the downside in a market like this, I continue to run screens of fundamentally and technically sound stocks to identify potential long ideas for when the market turns.
One stock that has been on my watch list for weeks -- and was not knocked off that perch in Friday's bloodbath -- is Lumber Liquidators (LL). The discount flooring retailer looks worse on a daily chart than on a weekly. It plunged 5.2% Friday in heavier volume than the prior session, but remained above its 50-day average, closing at $27.58.
For a little more context, I also checked a weekly chart. Lumber Liquidators is holding above its 10-week line, but significantly, it never undercut the low of the previous week, $27.37. It's encouraging that it is getting solid technical support; however, continued selling this week could, of course, erase that. Still, I will be monitoring this name for continued price reinforcement near its 10-week line.
A few regional banks have been among the best technical performers in the recent market downturn. Texas Capital Bank (TCBI), like Lumber Liquidators, is continuing to hold above its 50-day and 10-week lines. In fact, the small cap closed Friday just slightly below its 10-day and 20-day averages, which have been trending together since May 24, when the 20-day moved higher to meet the shorter line.
The stock ended Friday's session at $37.49, well within its month-long range between $39.31 and $36.04. In a market downturn, it can be difficult to peg a possible technical buy point. In a better market, if the stock crosses above its 10-day line - and as long as that shorter-term average remains above the 20-day - that could offer an entry point.
The stock hit resistance at $39.31 on April 30, $39.27 on May 11, and $39.30 on May 29 -- so clearly, the $39.30 vicinity would also be an area to watch as a possible buy point in a bull market.
For now, I'll just see whether this continues to maintain its support above the 10-week line. As I mentioned above, I am not planning any new buys at this juncture, other than inverse ETFs.
However, another stock that popped up onto my screens is Nationstar Mortgage (NSM), which provides residential loans to consumers. The stock went public in March at $14, amid little fanfare. It closed Friday at $18.97, a gain of 36% since its IPO.
The stock gapped up 9% on May 29, following a bounce off its 50-day line in the previous session. Despite the indices' decline last week, Nationstar finished with an advance of 7.3%.
In a good sign that professional investors are jumping into the stock, volume was above average on May 25, as it got 50-day support, and even heavier on May 28 as it gapped up.
As with the stocks named above, the technical support appears to bode well. Stocks outpacing the general market in a downturn are often well situated to notch additional price moves when a new uptrend emerges.
