DecisionPoint scans produced very little today, but the clear sector winner was Healthcare. Scans have been picking up stocks from this sector for the past week. Certainly Eli Lilly's (LLY) monster move on strong earnings help propel the sector higher, but I'm seeing some interesting trades underneath the surface.
Biotechnology and Pharma seem to be where the action is on the scans, but I did see a Medical Equipment and a Medical Supply stock in the results. I didn't care for the charts. I do have two stocks that I'm not covering as runner-ups. One is due to report earnings tomorrow (ANIP) and the other is meeting resistance right now (EXEL). I think they could still be on your radar.
The market didn't finish higher today despite an upside initiation climax yesterday. This tells me there is a lot of internal weakness in the broad market so be very careful with portfolio expansion and set those stops!
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": DVAX, VTRS and ZTS.
Runner-ups: ANIP and EXEL.
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Topic: DecisionPoint Diamond Mine (8/11/2023) LIVE Trading Room
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Here is the last recording from 8/7:
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.
Dynavax Technologies Corp. (DVAX)
EARNINGS: 11/02/2023 (AMC)
Dynavax Technologies Corp. operates as a biopharmaceutical company, which engages in the discovery, development, and commercialization of novel vaccines and immuno-oncology therapeutics. Its product includes HEPLISAV-B, which prevents infection caused by all known subtypes of hepatitis B virus in adults 18 years of age and older. The company was founded by Lawrence M. Lichtenstein, Dennis A. Carson, and Eyal Raz on August 29, 1996 and is headquartered in Emeryville, CA.
Predefined Scans Triggered: P&F Bear Trap, Moved Above Upper Price Channel and P&F Double Top Breakout.
DVAX is down -0.60% in after hours trading. DVAX broke out yesterday and saw follow-through today. It's in a solid rising trend. I would like this one on a pullback to new support even better as it seems due to consolidate. The RSI is positive and not yet overbought. The PMO is nearing a Crossover BUY Signal. Stochastics are rising strongly and are above 80. Relative strength is definitely picking up for Biotechs and this one has definitely shown leadership within the group. The stop is set below the 20-day EMA, a little over halfway down the prior trading range at 7.2% or $13.81.
The weekly chart is great minus the overbought weekly RSI. We do know that overbought conditions can persist in a bull market configuration as DVAX has so I've forgiven that. The weekly PMO is rising on a Crossover BUY Signal and the StockCharts Technical Rank (SCTR) is at the top of the hot zone*. I think you could consider this one an intermediate-term investment, not just a short-term trade.
*If a stock/ETF is in the "hot zone" above 70, it implies that it is stronger than 70% of its universe (large-, mid-, small-caps and ETFs) primarily in the intermediate to long terms.
Viatris Inc. (VTRS)
EARNINGS: 08/07/2023 (BMO) ** Reported Yesterday **
Viatris, Inc. is a global healthcare company, which engages in the provision of access to medicines and sustainable operations. It also offers support services such as diagnostic clinics, educational seminars, and digital tools. The firm operates through the following segments: Developed Markets, Greater China, JANZ, and Emerging Markets. The Developed Markets segment consists of operations primarily in North America and Europe. The Greater China segment includes operations in mainland China, Taiwan and Hong Kong. The JANZ segment consists of operations in Japan, Australia and New Zealand. The Emerging Markets segment encompasses operations with developing markets and emerging economies including countries in Asia, the Middle East, South and Central America, Africa and Eastern Europe. The company was founded on February 14, 2019 and is headquartered in Canonsburg, PA.
Predefined Scans Triggered: None.
VTRS is unchanged in after hours trading. We saw a strong breakout yesterday on earnings and nice follow-through today. It's been in a solid rising trend since June. The RSI is overbought unfortunately so we may see a pullback or some consolidation to bring it back down. If the stock is internally strong, it can hold overbought conditions. The PMO appears overbought, but isn't considering its recent low was around -5. Stochastics have remained in positive territory since early July and are rising in positive territory again. I notice a Golden Cross of the 50/200-day EMAs. Relative strength is picking up for the group and VTRS definitely holds a leadership role within the group. The stop is set well below gap support and the 20-day EMA around $10.45.
The weekly chart is very favorable, but I wouldn't consider this an intermediate-term investment until we see a breakout above 2023 highs. The weekly RSI is positive, rising and not overbought. The weekly PMO is rising above the zero line on a Crossover BUY Signal. The SCTR is almost in the hot zone. Upside potential is over 34% if it can get above resistance.
Zoetis Inc. (ZTS)
EARNINGS: 08/08/2023 (BMO) ** Reported Today **
Zoetis, Inc. engages in the discovery, development, manufacture, and commercialization of medicines, vaccines, diagnostic products and services, biodevices, genetic tests, and precision animal health technology. The firm operates through the United States and International geographical segments. The United States segment is involved in U.S. market and regulatory activities. The International segment includes non-U.S. market and regulatory activities. The company was founded in 1952 and is headquartered in Parsippany, NJ.
Predefined Scans Triggered: Elder Bar Turned Green and P&F High Pole.
ZTS is up +0.37% in after hours trading. ZTS rallied strongly on earnings today, setting up what could be a breakout from a bull flag formation. The RSI is positive and the PMO has surged above the signal line. Stochastics are rising again and volume definitely has come in on the rally. I'm not sure what was the reason behind the lengthy decline after the late July rally, but it does seem fears have been allayed. Relative strength in the near-term hasn't been great for ZTS against the group or the SPY, but we still have rising trends. The decline definitely took the wind out of ZTS sails. The stop is set below support and the 50-day EMA at 7.8% or $174.53.
There is a large reverse head and shoulders on the weekly chart and we are nearing confirmation of the pattern with a breakout above the neckline. The minimum upside target of the pattern would take price back to the all-time high. The weekly RSI is positive and rising and the weekly PMO is rising after a whipsaw SELL Signal. The SCTR is in the hot zone. When the pattern is confirmed, that would make it an intermediate-term investment. Upside potential if the minimum upside target is reach would be over 30%.
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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% long, 4% short.
I'm required to disclose if I currently own a stock I mention and/or may buy/short it within the next 72 hours.
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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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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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