Today's scan results include two Technology - Software companies. I highlighted Microsoft (MSFT) some time ago and it has since performed well. Overall, the past week has been difficult with regard to finding the right "diamonds in the rough," but I have to say that today wasn't too difficult using my "Bullish EMA - Mid-Range SCTR" Scan. See what you think of these five stocks.
I love to get your feedback on DP commentary, so shoot me an email at erinh@stockcharts.com. I read every one of them and try to answer them all! Your insight helps me to tailor my commentary to what my readers and viewers want to hear about.
Welcome to DecisionPoint Daily Diamonds, wherein I highlight five "diamonds in the rough." 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!
Current Market Outlook:
Market Trend: Currently, we have Trend Model BUY signals in all three timeframes on the DP Scoreboard Indexes.
Market Condition: The market is overbought, with Price Momentum Oscillator (PMO) BUY signals on the DP Scoreboards. Remember, overbought conditions can persist in a bull market.
Market Environment: It is important to consider the odds for success. The Silver Cross Index measures the percentage of stocks on IT Trend Model BUY signals (20-EMA > 50-EMA), while the Golden Cross Index measures the percentage of stocks on LT Trend Model BUY signals (50-EMA > 200-EMA). Here are the current percentages on the Silver and Golden Cross Indexes:
Diamond Index:
- Diamond Scan Results: 3
- Diamond Dog Scan Results: 3
- Diamond Bull/Bear Ratio: 1.0
Catalent Inc (CTLT) - Earnings: 2/3 - 2/7/2020
CTLT has been in a gently rising trend channel and has now decided it wants to move higher faster. Not only did it break above that rising trend channel, but it then pushed above the early August low. My upside target would be $58+, but do stay aware of a possible hiccup at $56 that coincides with the early July top. The PMO has now reached positive territory and the SCTR is making a move toward the "hot zone" above 75.
Looking at the weekly chart, I think an upside target at new all-time highs is reasonable. The weekly PMO is turning up and could be headed toward a BUY signal.
Lowes Companies Inc (LOW) - Earnings: 2/25 - 3/2/2020
LOW broke out above the April top and has since pulled back to that breakout point. This could be a good entry if it holds that support. The PMO is not overbought and the SCTR has already reached the hot zone. The OBV could look a bit better with a top above the September top, but I'll forgive that as long as it doesn't drop below November's low reading.
The breakout looks encouraging and the pullback could be an opportunity.
Moody's Corp (MCO) - Earnings: 2/13 - 2/17/2020
Excellent volume has been coming in on MCO, so the OBV is currently confirming the rally. The PMO is rising nicely and is not overbought. The SCTR is a very respectable 77.8.
The PMO has turned back up and has plenty of room to move higher before getting that overbought.
MongoDB Inc (MDB) - Earnings: 12/9/2019
The large cup structure on MDB is bullish. My only worrying though is that we could enter a pullback here that would form a "handle" on this cup. At this point, I'm happy it is consolidating the short-term rally. This could be all that is needed before it continues higher.
The declining trend breakout is bullish; note that the PMO is taking notice and has turned back up in oversold territory (at least given the historic data we currently have on the weekly PMO).
Smartsheet Inc (SMAR) - Earnings: 12/4/2019
Be sure to keep in mind that earnings will be reported after the holiday. Price has broken out above the August low. The indicators look very healthy. The IT and LT Trend Models just clicked BUY signals as the 20-EMA crossed above the 50-EMA and the 50-EMA crossed above the 200-EMA. Notice the PMO is accelerating higher even with the short pause we saw last week. The SCTR has hit the hot zone. I would keep an eye out for possible trouble at the March high ($49), but my upside target would be at $53-$56.
The PMO has turned up on the weekly chart. The upside resistance is marked clearly on the weekly chart.
Full Disclosure: I do not own any of the stocks above and I'm not planning on adding any at this time. I'm currently about 80% in cash.
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Technical Analysis is a windsock, not a crystal ball.
Happy Charting!
- Erin
erinh@stockcharts.com
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."
Helpful DecisionPoint Links:
DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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