OVERVIEW
A Breakout In Growth

November was the best month of 2024 for the S&P 500, with a 5.7% gain that helped the index reach new all-time intraday and closing highs during Friday’s shortened trading session. This strong performance was driven by a surge in momentum, marking a key milestone for the index.

As we head into this week, the big question is whether we will continue to see the sideways consolidation and underperformance that dominated the past week, or if we are poised for another leg higher. To explore this, let's look at the IVW, the growth ETF for the S&P 500, which saw a breakout on Friday during the half-session. It surged past its overhead supply level, breaking above $100 for the first time since its breakout in early November, signaling potential for further upside and gives evidence that the seasonally strong December period is here.

Tesla shares kicked off December with a gain, thanks to excitement around an important update to its Full Self-Driving (FSD) software. This update, powered by artificial intelligence, is a key part of CEO Elon Musk's vision for Robotaxis. Tesla’s AI-based FSD uses cameras and neural networks to enhance its self-driving capabilities. Additionally, Musk’s connections with President-elect Donald Trump, including financial backing and support on social media, could help speed up regulatory approvals for the FSD technology. Tesla’s stock rose 2% in premarket trading, approaching its 2.5-year high, after a 38.2% surge in November—the best month for the stock since January 2023. This rally is also fueled by the release of Version 13 of the FSD software, which improves Tesla's entire self-driving system.

So, what does all of this mean for today’s session?

Simply put, there’s a strong case for putting some cash back into the market after last week's cooldown. Tesla, in particular, looks like a promising opportunity. The stock is already trading above $350 in premarket, signaling a potential breakout. As one of the leading names in autonomous and electric vehicles, Tesla is well-positioned in a strong sector—the consumer cyclicals (XLY), which is currently the best-performing industry group.

This is further supported by the strength in the S&P 500 Growth ETF (IVW), making Tesla an even more attractive buy right now and our main focused stock for the day.

Nasdaq

The Nasdaq, which tracks large technology stocks, bounced off the rising 10-EMA during Friday's half-session on relatively high volume. The QQQ is now positioned for a potential breakout above a dense zone of overhead supply between $510 and $514, which will be a tough barrier to clear.

However, the strong demand we've seen recently—particularly with buyers aggressively stepping in during intraday dips below the 10-EMA and 20-EMA—signals that the Nasdaq is determined to keep pushing higher.

We anticipate a test of the $513 level in the next few sessions which will support the breakout in TSLA that we are seeing in pre-market. Furthermore, we have seen AAPL pushing over the last few sessions as it had its very own major breakout on Friday 22nd November which will work to drive the capitalization weighted QQQ higher.

S&P Midcap 400

The midcaps are still showing a medium-term upward trend as they consolidate around their point of control (POC) level of $615-$616, indicating strong demand. However, we can't overlook the volume pocket created by the unfilled gap down to $612, which historically is likely to be filled. As a result, we expect the midcaps to face some short-term pressure, with a potential intraday retracement to test the rising 10-EMA before any further upward movement can occur.

Russell 2000

The small caps have seen a series of higher lows, with the gap below getting filled earlier in the week. They were able to hold above $240 on Friday and are now forming what looks like a textbook volatility contraction pattern (VCP) within a major demand zone.

However, similar to the midcaps (MDY), there is a risk of a pullback to test the rising 10-EMA, which could be slightly extended at this point. This could present a short-term retracement before any further upward movement can take hold.

DAILY FOCUS
Focus On Where Relative Strength Is Shown

The market is setting up for what could be a key breakout, with large-cap technology stocks showing strong relative strength. As seen in the premarket action, stocks like Tesla are leading the charge, but the broader market—especially the Nasdaq—holds more promise for today’s momentum trades. The Nasdaq’s recent consolidation is a classic setup for a breakout, and with the QQQ poised to push higher, we see the best opportunities in this space.

When analyzing momentum, it’s important to remember that the strongest breakouts often follow periods of consolidation. The Nasdaq has shown us just that—sideways action over the past week, which is now setting the stage for a breakout. After some cooling off, we are seeing demand step in, particularly as the Nasdaq tests key support levels like the rising 10-EMA. The volume surge on Friday and the subsequent holding above the 10-EMA signal that the buyers are ready to take control and push the market higher.

As traders, it’s crucial to remember that our goal isn’t to always be right or to maintain constant market exposure. Trading is far from glamorous; it demands patience, thorough research, and keen attention to detail. Successful trading hinges on waiting for the right opportunities rather than rushing into every potential setup. The most profitable trades often stem from careful analysis and a willingness to bide our time.

Currently, we’re in a period characterized by a lack of “directional volatility.” While price fluctuations are happening, they aren’t consistently trending in one clear direction. Instead, the market is experiencing choppy movements without a strong trend, which complicates our ability to identify solid trading opportunities. This was the case for a lot of last week and this is why before any entry is triggered today, we will need to actually wait for some type of confirmation through both a 5-min opening range high (ORH) breakout combined with a high relative volume (+100% on hourly breakout candle).

WATCHLIST
Today’s Breakout Watch

TLN: Talen Energy Corporation

• TLN has been experiencing a significant contraction in volatility over the past two weeks, with both volume and price action indicating a major coiling of price, similar to a spring ready to release. This type of consolidation often precedes a sharp move in either direction, and TLN appears primed for such a breakout

• In premarket trading today, TLN is pushing higher, and it’s clear that a move above the $220 level could signal a potential long entry. This breakout, if confirmed with strong volume, would suggest that the stock is poised for a larger move especially with how the utilities sector (XLU) has been leading recently.

OKLO: Oklo Inc.

• OKLO, the clean energy company focused on developing fission reactors, has been forming a multi-month base with a series of higher lows throughout November. This constructive price action signals increasing demand and potential for further upside. Today, in premarket trading, we’re seeing a test of the descending resistance level at $24.15, which is a critical level to watch.

• The technical strength in OKLO’s chart, combined with its strong position in the rapidly growing clean energy sector, makes this stock a standout. Sam Altman’s backing further adds confidence, as it highlights the company’s potential for innovation and growth within the clean energy space.

• OKLO has been one of the strongest names we’ve tracked this month, and today’s test of resistance could be a key moment for traders looking for a potential breakout. If it breaks through $24.15 with strong relative volume on a 5-min opening range high break, we will be looking for a entry.