You may recall yesterday’s letter – I said that the market is getting pretty darn hot. 

We’re seeing capital flow freely into all kinds of equities, from small to large – people are greedy for some upside!

Which to me only means one thing – time to dust off my Total Alpha playbooks!

ALTO Above $6:

I’m thinking the buyers are ready to finally take control in the stock and create some upwards momentum. 

For confirmation, I’m watching for 2 key indicators:

1. TTM Squeeze: The TTM Squeeze is reading red dots with a positive momentum histogram. I want to watch for the momentum histogram to stay above 0 (positive) and the bulls take control.  If they do and the dots fire green, I would expect a move to the upside, targeting the 127% and 161% Fib Extension levels.
2. On Balance Volume: Positive Divergence occurring at these levels with the OBV sloping higher while the stock is moving sideways. This suggests to me that buyers are still coming into the stock at these levels and the bears are weaker and will step out of the way once the trend resumes to the upside.
   

Hence, I plan to be in the stock above $6, with the stop right below it. My targets are as follows from the chart: $6.52 and $6.86. 

If you were to trade options, one contract I’m eyeing is 20 May $4 Calls – it allows for more leverage while keeping the risk relatively low. 

Just make sure you respect the same stop level and beware of the lower liquidity.

AMAT Above $37:

The idea here is similar to ALTO, albeit with one adjustment – AMAT has been on a slow grind higher and, market permitting, might be ready to have a strong push through. 

Should that happen – the stock may easily have a solid “next” leg higher – and that’s exactly my thesis. 

Confirmation: 

1. TTM Squeeze: The dots are red and showing positive momentum on the histogram right now. I want to see the bulls resume their upward trend with positive momentum and turn them green – signaling buyers are in control of the stock and bears have given in. 
   
2. On Balance Volume: There’s Positive Divergence forming with a rising OBV indicator. Positive divergence is confirming for me that bulls are in control of the stock, and once will support the up move once bear pressure eases. 

I’m looking to be long above $138 with a stop below $137. My two targets are $140.76 and $145.06 – both based on Fibonacci extensions, as you can see from the chart.

If you were to go with options, I like this contract: 1 APR $135 Calls.