With the market environment suspect for investing, I opted to find stocks that meet our "diamond in the rough" criteria but have the option to set a tight stop. Remember that using a 5-minute candlestick chart to time your entries (and exits), you may be able to tighten the stop even more if you found an entry below today's closing price. I am still opting not to expand my portfolio at this time until I see DP market indicators improving. Read the DP Alert for more information.
I sold previous Diamond, Disney (DIS) today after seeing the very overbought PMO SELL signal lining up. My portfolio is still about 50% exposed and 50% in cash. The primary exposure I do have is in solar as well as more defensive positions like gold and bonds. I will admit, that a few of today's big name diamonds are enticing me given the very tight stops which limit risk.
Today's "Diamonds in the Rough" are: AZN, DGX, GILD, JEF and NVDA.
Diamond Mine Information:
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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!
Astrazeneca PLC (AZN)
EARNINGS: 2/11/2021 (BMO)
AstraZeneca Plc is a holding company, which engages in the research, development, and manufacture of pharmaceutical products. Its pipeline are used for the following therapy areas: oncology, cardiovascular, renal, metabolism, and respiratory. The company was founded on June 17, 1992 and is headquartered in Cambridge, the United Kingdom.
Currently down -0.24% in after hours trading, AZN was covered as a reader request that I had some doubts about in the July 23rd Diamonds Report (down -8.1% since). It is a name that has been in the news and many have requested in the trading rooms to see some of the big name pharmas that are involved with the COVID vaccine. I have not been a fan of these stocks, but some are beginning to look good. AZN is one of them. It hit an oversold low and is making its way back up. There is a very small bullish reverse head and shoulders and the PMO is nearing a BUY signal. It isn't completely "ripe" which makes it a "diamond in the ROUGH". The RSI is rising, but it is still negative; I prefer a positive RSI before trading. Price isn't yet above its 20-EMA nor has the 5-EMA crossed above it; I prefer a 5/20-EMA positive crossover also known as a ST Trend Model BUY signal. Price has technically broken above the downward sloping neckline of the pattern, but it isn't a decisive breakout yet. I would be willing to take a chance on this one given the tight stop. If I position size properly, I will be okay if this stop is hit.
The weekly chart doesn't look that great, although we do see that price is holding above major support at the 2019 top and 2020 lows. The PMO does look like it is decelerating somewhat in oversold territory. We may be getting on this one early, but that is what increases our risk.
Quest Diagnostics Inc. (DGX)
EARNINGS: 2/4/2021 (BMO)
Quest Diagnostics, Inc. engages in the provision fo diagnostic testing, information and services. It operates through the Diagnostic Information Services (DIS) and All Other segments. The DIS segment offers diagnostic information services to patients, clinicians, hospitals, health plans, and employers. The All Other segment consists of risk assessment services, healthcare information technology, diagnostic products, and clinical trials testing businesses. The company was founded in 1967 and is headquartered in Secaucus, NJ.
Currently DGX is up +0.51% in after hours trading. I covered DGX in the February 27th (up +9.7%) and September 15th (up +7.2%) Diamond Reports. It hasn't done much for awhile, but it appears ready to make a move to the upside. The RSI has just recently hit positive territory above net neutral (50). The PMO has just turned up and I noticed a slight positive divergence between price bottoms and OBV bottoms. The stop is very tight at 6% to reduce downside risk.
The weekly RSI just turned up before hitting negative territory. The PMO is still falling, but it beginning to decelerate slightly.
Gilead Sciences, Inc. (GILD)
EARNINGS: 2/2/2021 (AMC)
Gilead Sciences, Inc. is a biopharmaceutical company, which engages in the research, development, and commercialization of medicines in areas of unmet medical need. The firms primary areas of focus include human immunodeficiency virus, acquired immunodeficiency syndrome, liver diseases, hematology, oncology, and inflammation and respiratory diseases. It offers antiviral products under Harvoni, Genvoya, Epclusa, Truvada, Atripla, Descovy, Stribild, Viread, Odefsey, Complera/Eviplera, Sovaldi, and Vosevi brands. The company was founded by Michael L. Riordan on June 22, 1987 and is headquartered in Foster, CA.
Currently GILD is up +0.25% in after hours trading. Interestingly I covered DGX at the same time as GILD in the February 27th Diamond Report (down -17.4% since) as a reader request that I was neutral to bearish on. I also covered it on June 9th (stopped out at a -7.2% loss) as a diamond in the rough. It's back on my radar despite not shining up to be a Diamond previously. It's at an oversold level. We have a double-bottom that has formed after a long decline. Price broke out yesterday above the 20/50-EMAs. Today it pulled back toward that previous support level at the 50-EMA but closed well above it. The PMO is on a BUY signal and the RSI is positive. The stop is tight at just over 6.7%.
The double-bottom is prominent on the weekly chart. The RSI is negative but it is rising and the PMO is bottoming. We can see that this level has been the turning point for GILD numerous times. You can see that the stop set above basically gets you out if this strong support level at $55 doesn't hold.
Don't forget, on Thursdays I look at reader-requested symbols, so shoot me an email at erin@decisionpoint.com. I read every email I receive and try to answer them all!
Jefferies Financial Group Inc. (JEF)
EARNINGS: 3/25/2021 (AMC)
Jefferies Financial Group, Inc. is a holding company, which engages in the provision of financial services. It operates through the following segments: Investment Banking, Capital Markets, and Asset Management; Merchant Banking; and Corporate segments. The Investment Banking, Capital Markets, and Asset Management segment consists of investments in Jefferies Group. The Merchant Banking segment includes various merchant banking businesses and investments, primarily including Linkem, Vitesse Energy Finance and JETX Energy, real estate, Idaho Timber, and FXCM. The Corporate segment pertains to cash and cash equivalents, financial instruments owned, and deferred tax asset of the firm. The company was founded in 1968 and is headquartered in New York, NY.
JEF is up +0.25% in after hours trading. I was specifically watching my scans for Financials. Many of them rallied after the last stimulus bill was passed. It's only one data point, but it made sense that we could see some action in this sector. JEF is not a bank, but I had to present the chart despite a deep 9.2% stop. The strong breakout from the trading range occurred yesterday and today price was up substantially but closed much lower (still at a profit though). Price remains safely above the trading range. The RSI is somewhat overbought but positive nonetheless. The PMO is zeroing in on a crossover BUY signal. The OBV is confirming the breakout. It also helps that it has internal and relative strength based on the high SCTR value.
Today's high actually pushed price against strong resistance at the 2018 top. I also note that the weekly RSI is very overbought. However overbought conditions on a weekly chart can last weeks and weeks. The weekly PMO is rising strongly, although it is overbought as well.
NVIDIA Corp. (NVDA)
EARNINGS: 2/17/2021 (AMC)
NVIDIA Corp. engages in the design and manufacture of computer graphics processors, chipsets, and related multimedia software. It operates through the Graphics Processing Unit (GPU) and Tegra Processor segments. The GPU segment comprises of product brands, which aims specialized markets including GeForce for gamers; Quadro for designers; Tesla and DGX for AI data scientists and big data researchers; and GRID for cloud-based visual computing users. The Tegra Processor segment integrates an entire computer onto a single chip, and incorporates GPUs and multi-core CPUs to drive supercomputing for autonomous robots, drones, and cars, as well as for consoles and mobile gaming and entertainment devices. The company was founded by Jen-Hsun Huang, Chris A. Malachowsky, and Curtis R. Priem in January 1993 and is headquartered in Santa Clara, CA.
NVDA is up +0.08% in after hours trading. I've covered NVDA three previous times: March 3rd (up +101.7% since), April 7th (up 107.0% since), and on December 2nd (down -1.0% and stop not hit yet at $500). Like many of the big name large cap stocks, NVDA hasn't done much since mid-November. I believe its time has finally come. The RSI is positive and rising. The PMO is nearing an oversold crossover BUY signal. I can't annotate the thumbnail, but you'll notice a positive OBV divergence between price lows and OBV bottoms. The stop is somewhat deep at 8.6%, but you can tighten it to $500 to match the previous stop level from December 2nd.
The weekly RSI is favorable, but the diving PMO is not. It's holding above the 17-week EMA and has formed what looks like a possible pennant on a flagpole. This would suggest much higher prices and a breakout past the 2020 high.
Full Disclosure: I'm about 50% invested and 50% is in 'cash', meaning in money markets and readily available to trade with. I'm holding off adding any positions right now.
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)
- The Bullish Percent Index (BPI) shows the percentage of SPX stocks on Point & Figure BUY signals.
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:
Diamond Index:
- Diamond Scan Results: 6
- Diamond Dog Scan Results: 4
- Diamond Bull/Bear Ratio: 1.50
I'm in the process of trying to plot the Diamond Index, but with time at a premium, it is on the back burner.
Technical Analysis is a windsock, not a crystal ball.
Happy Charting!
- Erin
erin@decisionpoint.com
Watch the latest episode of DecisionPoint with Carl & Erin Swenlin on Mondays 7:00p EST or on the DecisionPoint playlist on the StockCharts TV 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."
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!