The scan results weren't plentiful, but of the results there were three clear themes to exploit. Let me talk about the market a little bit first. Internals are still fairly strong, but we aren't seeing much enthusiasm (volume) on the rallies which gives us a sense that the market is vulnerable right now.
With that in mind I found it interesting that one of the themes was value and dividend funds. If the market weakens somewhat, this will be a good place to take advantage. Defensive areas of the market will be outperforming.
The second theme was Energy related MLP funds. I found one that seems to do better than the others.
The final theme was Financials including the Financials ETF (XLF) which I'll be presenting. Mobile payments and Fintech ETFs were also in the results, but the sector itself looked the strongest.
You'll notice that some of these funds have been underperforming the market. Over the long haul most are still outperforming. We're looking to take advantage of some reversal type plays so they may have some underperformance issues.
I opted not to add to my portfolio, but yesterday's are still on my list for possible adds including EME which I think looked the best of the four I presented yesterday. I don't always have a favorite, but when I do, I'll let you know. Please do not think those will be sure things. Nothing is.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": AMJ, VYM and XLF.
Runners-up: AMLP, MLPX, DLN, MTUM and NOBL.
RECORDING & DOWNLOAD LINK (5/3/2024):
Topic: DecisionPoint Diamond Mine (5/3/2024) LIVE Trading Room
Recording & Download Link
Passcode: May##3rd
REGISTRATION for 5/10/2024:
When: May 10, 2024 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (5/10/2024) LIVE Trading Room
Register in advance for this webinar HERE
After registering, you will receive a confirmation email containing information about joining the webinar.
Here is the latest recording from 5/6. Click HERE to subscribe to the DecisionPoint YouTube Channel to be notified when new content is available.
Welcome to DecisionPoint Diamonds, wherein I highlight ten "Diamonds in the Rough" per week. These are selected from the results of my DecisionPoint Scans which search for stocks that could benefit from the trend and condition of the market. Remember, these are not recommendations to buy or sell, but are the most interesting of the stocks that surfaced in my scans. My objective is to save you the work of the initial, tedious culling process, but you need to apply your own analysis to see if these stocks pique your interest as well. There are no guaranteed winners here!
"Predefined Scans Triggered" are taken from StockCharts.com using the "Symbol Summary" option instead of a "SharpChart" on the workbench.
Stop levels are all rounded down.
Frontline Ltd. (FRO)
EARNINGS: 05/31/2024 (BMO)
Frontline Plc is an international shipping company, which engages in the ownership and operation of oil and product tankers. It also offers the seaborne transportation of crude oil and oil products. The company was founded in 1985 and is headquartered in Limmasol, Cyprus.
Predefined Scans Triggered: Moved Above Upper Keltner Channel, New 52-week Highs, Moved Above Upper Bollinger Band, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
FRO is up +0.04% in after hours trading. Today's rally was great follow through on yesterday's breakout move. This one has been showing pure strength based on the flat PMO above the zero line and now we have a strong PMO Crossover BUY Signal. The RSI is not overbought and Stochastics are holding above 80. The group is performing very well and FRO is showing some outperformance against the group. This has given it a nice rising relative strength line against the SPY. The stop is set between the 20/50-day EMAs at 7.5% or $23.80.
The weekly chart looks great and suggests this one could be considered for an intermediate-term investment not just a short-term trade. The weekly RSI is positive and not overbought. The weekly PMO is scooping upward well above the zero line. The StockCharts Technical Rank (SCTR) is in the hot zone* above 70. Consider a 17% upside target to about $30.10.
*If a stock is in the "hot zone" above 70, it implies that it is stronger than 70% of its universe (large-, mid-, small-caps and ETFs) primarily in the intermediate to long terms.
United States Natural Gas Fund (UNG)
EARNINGS: N/A
UNG holds near-month futures contracts in natural gas, as well as swap contracts.
Predefined Scans Triggered: Moved Above Upper Keltner Channel, Moved Above Upper Bollinger Band, Moved Above Upper Price Channel and P&F Double Top Breakout.
UNG is down -0.12% in after hours trading. Today it had an over 6% rally today and that is likely to lead into some downside tomorrow which would offer an opportunity to get in. The chart has really matured. The only problem I see is nearing overhead resistance where we could see it stymied. But the setup is pretty good. We have price back above both the 20/50-day EMAs. The RSI is positive and not overbought. The PMO has just crossed above the zero line on a Crossover BUY Signal and Stochastics are above 80. It's a good setup but be ready for a possible decline when it hits resistance. The stop is set at the 50-day EMA at 7.3% or $15.68.
We keep thinking that UNG is as low as it can go, but it has no problem setting new lows. This is a boom or bust play, it is either going to bust or you'll get a big boom. This is the best it has looked on the weekly chart since that last strong rally. The weekly PMO is giving us a Crossover BUY Signal. The weekly RSI is still negative, but it is rising as price moves up. The SCTR is terrible, reading is almost as low as you can go. This is a high risk play, but upside potential could be amazing.
Westlake Chemical Corp. (WLK)
EARNINGS: 08/01/2024 (BMO)
Westlake Corp. Is a global diversified industrial company, which engages in the manufacturing and supplying of essential products. It operates through the Performance and Essential Materials, and Housing and Infrastructure Products segments. The Performance and Essential Materials segment includes Westlake North American Vinyls, Westlake North American Chlor-alkali and Derivatives, Westlake European and Asian Chlorovinyls, Westlake Olefins, Westlake Polyethylene, and Westlake Epoxy. The Housing and Infrastructure Products segments refers to the Westlake Royal Building Products, Westlake Pipe and Fittings, Westlake Global Compounds, and Westlake Dimex. The company was founded by Ting Tsung Chao in 1986 and is headquartered in Houston, TX.
Predefined Scans Triggered: Moved Above Upper Bollinger Band.
WLK is unchanged in after hours trading. I like the rebound off support as it makes its way higher. The RSI is positive and not overbought. The PMO is giving us a Crossover BUY Signal above the zero line. Stochastics are above 80 and the OBV is rising to confirm the current rally. The group is performing well and while WLK hasn't been outperforming of late, overall it does tend to outperform. The relative strength line is in a rising trend that is holding up. Most important is that it is outperforming the SPY. I've set the stop beneath support at 7.5% or $145.51.
I had liked DOW which is another chemical company that was requested, but the weekly chart did not look as good as WLK's. WLK is in a long-term rising trend and DOW was not. WLK looks good for a possible intermediate-term investment given the positive weekly RSI and weekly PMO surging above the signal line. The SCTR is also in the hot zone. Consider a 17% upside target to about $184.05.
Don't forget, on Thursdays I look at reader-requested symbols, click HERE to send me an email. I read every email I receive and try to answer them all!
Current Market Outlook:
Market Environment: It is important to consider the odds for success by assessing the market tides. The following chart uses different methodologies for objectively showing the depth and trend of participation for intermediate- and long-term time frames.
- The Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA)
- The Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA)
Don't forget that as a "Diamonds" member, you have access to our GCI/SCI curated ChartList on DecisionPoint.com. You'll find it under "Members Only" links on the left side on the Blogs and Links Page.
Here is the current chart:
Full Disclosure: I am 40% long, 0% short. I own UNG.
I'm required to disclose if I currently own a stock I mention and/or may buy/short it within the next 72 hours.
"Technical Analysis is a windsock, not a crystal ball." - Carl Swenlin
(c) Copyright 2024 DecisionPoint.com
Watch the latest episode of DecisionPoint Trading Room with Carl & Erin Swenlin Mondays on the DecisionPoint YouTube channel here!
NOTE: The stocks reported herein are from mechanical trading model scans that are based upon moving average relationships, momentum and volume. DecisionPoint analysis is then applied to get five selections from the scans. The selections given should prompt readers to do a chart review using their own analysis process. This letter is not a call for a specific action to buy, sell or short any of the stocks provided. There are NO sure things or guaranteed returns on the daily selection of "Diamonds in the Rough."
Regarding BUY/SELL Signals: The signal status reported herein is based upon mechanical trading model signals and crossovers. They define the implied bias of the price index/stock based upon moving average relationships and momentum, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
Helpful DecisionPoint Links:
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
For more links, go to DecisionPoint.com