It was a successful week for "Diamonds in the Rough" in that they finished 2.5% higher than the SPY this week. It is getting hard to pick again so the bear is not in our rear view mirror.
One ETF beat all of the "Diamonds in the Rough" and it is this week's "Darling". Breakwave Dry Bulk Shipping ETF (BDRY) was chosen on Wednesday and finished up 9%.
The biggest loser this week was the Copper ETF (CPER). I was surprised it failed so spectacularly, but you'll notice I have the Sparkle Factor as "neutral" not "bearish". I'll explain more when we look at the chart below.
We narrowed it down to two sectors this morning as the Sector to Watch. As we finish the day and I see the participation numbers, I ended up picking Materials (XLB). This isn't to say it will have a great week, but it is set up more bullishly than some of the others. The runner-up was Consumer Staples (XLP). I opted for XLB as today it saw a beautiful bullish engulfing candlestick.
Not one sector has a rising PMO so that tells me to stay away from the market. If my portfolio starts to move in the wrong direction, I will not hesitate to shed positions and lock in profits.
I struggled with what Industry Group to Watch. I liked Food Products in Consumer Staples (XLP), but I opted to go with Commodity Chemicals which also showed a bullish engulfing candlestick today. I have some symbols to throw at you in that group.
Have a great weekend!
Good Luck & Good Trading,
Erin
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A few items about the spreadsheet: I've put on the spreadsheet whether the RSI is positive (green) or negative (red). The PMO column tells you if it is rising (green) or falling (red). Finally I've added my own "Sparkle Factor" that gives you my assessment going forward, bullish (green), bearish (red) or neutral (gray). The Sparkle Factor is basically my thoughts on whether I expect it to rise or fall. A neutral means it could really go either way so it could be added to a watch list. If you're in a stock I consider "neutral" going forward, the ball is in your court.
Darling:
Breakwave Dry Bulk Shipping ETF (BDRY)
EARNINGS: N/A
BDRY tracks an index of long-only exposure to the nearest calendar quarter of dry bulk freight futures contracts on specified indexes. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Green, Bullish MACD Crossovers, P&F Triple Bottom Breakdown and P&F Double Bottom Breakout.
Below are the commentary and chart from Wednesday (2/22):
"BDRY is up +0.14% in after hours trading. Price has broken out of a bullish falling wedge. Yesterday was a breakaway gap and today looks like a continuation gap that suggests price will continue higher. The indicators aren't completely ripe right now, but they are headed in the right direction. The RSI is rising and nearing territory above 50. The PMO has turned up and is nearing a crossover BUY signal. Stochastics are rising strongly, but not yet above 80. Given today's over 3% move, the stop has to be deep at 8.1% around $6.69."
Here is today's chart:
BDRY was down slightly today. Yesterday's gap up is what propelled this one to the top spot. The chart continues to mature and today's pause suggest we will see a continuation. I like that in spite of this strong rally, the RSI is not at all overbought. The BUY signal looks great on the PMO and Stochastics have now moved above 80 suggesting internal strength. I will be looking to add this one if I shed any positions next week. Given the ugly look of the sectors, I want to limit my exposure to 25% at most.
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!
Dud:
United States Copper Fund (CPER)
EARNINGS: N/A
CPER tracks a rules-based index of copper futures contracts selected based on the shape of the copper futures curve. Click HERE for more information.
Predefined Scans Triggered: P&F Low Pole.
Below are the commentary and chart from Wednesday (2/22):
"CPER is up +0.28% in after hours trading. CPER pulled back quite a bit, but has now formed a small bullish double-bottom that was confirmed yesterday with the gap up. Today was a mechanical pullback toward the breakout point. The RSI is positive and Stochastics are rising in positive territory. The PMO is a little iffy as it does want to turn down below its signal line. I like it on this pullback. The stop is thin at 5% around $24.05."
Here is today's chart:
The stop nearly triggered at the end of the day, but ultimately it was down -4.98%. While this chart has gone south in a hurry, I haven't listed it with a bearish Sparkle Factor. This pullback to support could be an interesting entry. The unfortunate thing is that this decline has decimated the indicators which would prevent me from entering. Still, I know some of you have high risk appetites and this could be interesting if it holds support here.
THIS WEEK's Sector Performance:
DecisionPoint Sector Scoreboard (Mechanical Trend Model Signals):
Click Here to view Carl's annotated Sector ChartList!
Sector to Watch: Materials (XLB)
I've added candlesticks to this chart primarily because I want you to note in the thumbnail that we have a giant bullish engulfing candlestick. Today's candle engulfs the prior three days! That's extraordinarily bullish. The indicators do not impress, but believe it or not I felt this was the most bullish sector chart. This is likely led by the Industry Group to Watch, Commodity Chemicals, whose chart looks very similar. The PMO isn't rising, but we are seeing slight improvement to stocks above their 20/50/200-day EMAs. The Silver Cross Index is below its signal line, but is steady and not falling. Stochastics have turned up. Relative strength is improving. It is worth a watch.
Industry Group to Watch: Commodity Chemicals ($DJUSCC)
This is probably one of the biggest bullish engulfing candlesticks I've seen. It encompasses the prior NINE days of candle bodies. The RSI is positive, rising and not overbought. The PMO is on its way up just above the zero line. Stochastics are rising strongly and relative strength is moving straight up. The stocks I found most interesting within the group: LXU, LIN and AVNT. While Food Products is not the Industry Group to Watch, I did find some interesting symbols within: INGR and CAG.
Go to our Sector ChartList on DecisionPoint.com to get an in-depth view of all the sectors. On StockCharts.com you can find the Industry Summary.
Good Luck & Good Trading!
- Erin
erin@decisionpoint.com
Full Disclosure: I'm 22% exposed. Considering BDRY.
Watch the latest episode of the DecisionPoint Trading Room with Carl & Erin Swenlin on Mondays 3:00p EST!
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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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