Another great rally in the market today. My scans were FULL of results and took quite a bit of time to cull, but I like the selections. I did find that two areas of the market to consider is not only Health Care, but also Technology. My problem right now is finding stocks who haven't already made a huge run up during this current bear market rally. I like Health Care stocks as I feel that they will have staying power in the market since they are tied to the virus. Real Estate is a problem for me. I was very fortunate to have sold my investment property in mid-March. The housing market is struggling. I'm noticing that price reductions are showing up every day on my realtor.com app. I'm concerned about the unemployment numbers and their ultimate effect on housing defaults. Lower interest rates help with refinancing and mortgages but they also can raise housing prices artificially. Most people go to buy a home or a car and they determine what monthly payment they can afford and determine the max price they can buy. Many times they end up paying more in sale price regardless of the actual 'value'. As a result, I believe that housing prices have been inflated too high. We will probably see distressed sales and defaults which I remember in 2008 caused home values to plummet. Basically, I don't think real estate investment is prudent right now.
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Acadia Pharmaceuticals Inc (ACAD) - Earnings: 4/29/2020 (AMC)
I picked three Biotechs today. This is the first. Indicators are all confirming the current rally. We have a decisive breakout above the declining tops trendline and the 20-EMA has crossed above the 50-EMA which is a "Silver Cross". A Silver Cross triggers an IT Trend Model BUY signal. Although it has been running, the PMO is not overbought. A 10% stop lands at about the 20-EMA.
This week, price is trading above long-term support around $41.50. The weekly PMO is turning up and I like the target at nearly 20% to the upside.
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!
Advanced Micro Devices (AMD) - Earnings: 4/28/2020 (AMC)
Unfortunately AMD has been running and it gapped up with a nearly 8% move to the upside. I suspect it will run up higher. We have a 20/50-EMA Silver Cross which triggers an IT Trend Model BUY signal. There is a reverse head and shoulders pattern that has just recently executed. The upside target of these patterns is a measured move the height of the pattern. I am looking for new all-time highs on AMD. Price isn't particularly overbought and the PMO definitely has room to proceed higher without becoming terribly overbought. It's SCTR tells us that it is in the Top Ten for all large-cap stocks.
AMD has been traveling along steeper and steeper rising bottoms trendlines. I am okay with that. The bear market low for AMD didn't ruin its rising trend in the least. The PMO has turned up suggesting higher prices. We only are about 7.5% from the all-time high, but for the reasons I outlined above, I believe it will continue higher.
Don't forget, on Thursdays I look at reader-requested symbols, so shoot me an email at firstname.lastname@example.org. I read every email I receive and try to answer them all!
Amedisys (AMED) - Earnings: 5/6/2020 (AMC)
I am little unsure of the Health Care Provider industry group. I preparing to sell my Cigna (CI) stock soon. I can tell you that it hasn't performed nearly as well as AMED. Today AMED broke out. It did close beneath resistance, but this might be an opportunity to take advantage of what looks like a strong rally. I note a new Silver Cross IT Trend Model BUY signal. The PMO is not overbought. The RSI tells us that price itself isn't overbought and the OBV is confirming. We even saw an OBV breakout on the price breakout which is bullish.
The PMO on the weekly chart has turned up and is about ready to trigger a new BUY signal. This is another stock whose rising trend wasn't broken on the bear market low. It actually became a springboard. There certainly is the possibility of a pullback since it didn't hold above resistance, but the indicators look pretty good in the short and intermediate terms.
Biogen Inc (BIIB) - Earnings: 4/22/2020 (BMO)
Here's a big name Biotech. Today it broke out from a volatile consolidation zone. The PMO and RSI are rising and not overbought. We have a recent Silver Cross IT Trend Model BUY signal. The OBV is confirming the move. I like that you can set a reasonable stop.
The weekly PMO has turned up before triggering a SELL signal. I always like to see bottoms above the signal line. It is near-term overbought based on the previous three years, but we have seen it stretch higher during strong run-ups. My upside target would be the 2018 top. I think it could challenge all-time highs, but 17% profit level would be a great time to reevaluate and possibly take partial profits.
Karyopharm Therpeutics Inc (KPTI) - Earnings: 5/7/2020 (BMO)
This one has appeared the last three days on my scans and given today's gain, I am sorry I didn't present it earlier. The PMO is about ready to trigger a BUY signal. Price broke out strongly from the declining trend and it has quite a bit of upside potential. OBV bottoms have remained fairly even while price bottoms are rising. That would be considered a positive reverse divergence. It tells us that price has been able to move higher even with lower volume. That suggests internal strength. I like the stop area at about 8.6%. You could set it deeper given the volatility to avoid stopping out, but that is a solid area of new support.
PMO continues to bottom above the signal line which is good. You have to like that upside target. Additionally we know that it has been much much higher which leaves us with some great upside potential in the intermediate to long term.
Current Market Outlook:
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). 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 are the current percentages on the Silver and Golden Cross Indexes:
- Diamond Scan Results: 1
- Diamond Dog Scan Results: 0
- Diamond Bull/Bear Ratio: 1.00
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Full Disclosure: I do not own any of the stocks above. I'm currently 60% in cash.
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Technical Analysis is a windsock, not a crystal ball.
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)
For more links, go to DecisionPoint.com!