It was a rough trading day for the market today and as a consequence, we saw bearish engulfing candlestick after bearish engulfing candlestick. If it didn't have a bearish engulfing, it had bearish filled black candlesticks. This tells us that tomorrow is likely not going to be a good day for the market. Candlestick patterns are generally one-day patterns. So while tomorrow may not look promising, at least we only have to take these candles into account today only.
The selection of ETFs was plentiful to begin with. I decided not to select strictly on a bullish or neutral candlestick patterns. Primarily I was looking at high StockCharts Technical Rank (SCTR) values and relative strength. This helped me narrow things down. I believe all of the runner-ups have rising relative strength and high SCTR values.
One theme that was prevalent was foreign ETFs. I found an ETF from iShares that seeks stocks from developed countries outside of the US and Canada (HEFA).
Materials still look very interesting so I chose Steel (SLX) for coverage of that area. I also included a Mining ETF (PICK) as this is one industry group that has excellent relative strength and participation based on the chart we review in the DP Alert daily of Gold Miners (GDX).
I am not interested in expanding my exposure right now and am considering taking some profits while the market hiccups.
Good Luck & Good Trading,
Today's "Diamonds in the Rough": HEFA, PICK and SLX.
Runner-ups: EWW, LIT, SPDW, VEU, LQD, HACK, XHE, COPX and ECH.
RECORDING LINK (1/13/2023):
Topic: DecisionPoint Diamond Mine (1/13/2023) LIVE Trading Room
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When: Jan 20, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (1/20/2023) LIVE Trading Room
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Here is the last recording (No show 1/16):
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.
iShares Currency Hedged MSCI EAFE ETF (HEFA)
HEFA tracks a market cap-weighted, USD-hedged index of large- and mid-cap stocks from developed countries outside the US and Canada. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Blue and New 52-week Highs.
HEFA is up +0.28% in after hours trading. I believe this is a bearish engulfing candlestick, but just barely. I liked it because the rising trend hasn't been compromised by today's decline. Speaking of the decline, it was quite benign given the shake-up in the US markets today. The RSI is positive and the PMO is rising on a crossover BUY signal. Stochastics are oscillating above 80. It has been gaining relative strength since August. The stop can be set thinly at 6% or 26.95.
I'm not happy that price is hitting resistance right now, but the chart still looks bullish given the positive RSI, rising PMO and strong SCTR. We also have a triple bottom chart formation. It failed to execute in late 2022, but it rebounded off the confirmation area and has been rising since. Given it is at new highs, consider a 15% upside target around 32.98.
iShares MSCI Global Metals & Mining Producers ETF (PICK)
PICK tracks a market-cap-weighted index of global metals mining, extraction or production firms, excluding gold and silver mining firms. Click HERE for more information.
Predefined Scans Triggered: Filled Black Candles, P&F Double Top Breakout and P&F Triple Top Breakout.
PICK is up +0.42% in after hours trading. As noted in the opening, I like Miners in general. This likely mirrors the SPDR Mining ETF (XME) if you're more comfortable with that ETF, but this one was actually up today. The RSI is positive and not overbought any longer. The PMO is rising on a crossover BUY signal. Stochastics are falling, but they are above 80. PICK has held rising relative strength since November. The stop can be set thinly at 5.6% or 42.86.
We can see that price is above near-term support as well as the high in 2021. The weekly RSI is positive and the weekly PMO is on a BUY signal and is no where near overbought. The SCTR is about the highest you can get at 99.5%.
VanEck Vectors Steel ETF (SLX)
SLX tracks a market-cap-weighted index of global steel firms. Click HERE for more information.
Predefined Scans Triggered: New CCI Buy Signals, Moved Above Upper Bollinger Band and Moved Above Upper Price Channel.
SLX is up +1.77% in after hours trading. I think the pullback of the past two days has offered us a nice entry and a reasonable stop level. Nucor (NUE) was a selection from the Steel group last Thursday. The RSI has now left overbought territory. The PMO is rising but is getting a bit overbought, but we have seen a -6 reading so a +6 reading isn't out of the question. It is only at +4. Stochastics are above 80 and relative strength has been building since September of last year. The stop is set at 6.9% or 60.07.
The weekly chart looks great. The weekly RSI is firmly positive above net neutral (50) and the weekly PMO is rising and not overbought on a BUY signal. The SCTR couldn't get much better at 99.5%. Since it is near all-time highs, consider an upside target around 15% or 74.21.
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 20% exposed.
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
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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.
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