It would've been a positive finish to the week without one big "dud" this week. The rest of the "Diamonds in the Rough" are starting to polish up. The market had a rebound this week, but is now looking as if it will be in a trading range after pressing pause on yesterday's decline.
The "dud" this week was one of the charts I really liked on Tuesday, Bausch & Lomb (BLCO). It had two horrible trading days and nearly hit its stop today. I don't see any redeeming qualities on the chart at present.
The "Darling" this week was reader requested Revolution Medicines (RVMD). It started off quietly today but finished with a bang to end the day up over 4%.
It was down to two sectors in the Diamond Mine today for "Sector to Watch", Real Estate (XLRE) and Utilities (XLU). It ultimately came down to the PMO which turned up for Utilities but fell for Real Estate. Neither looks extraordinarily healthy. I would say I have low conviction on XLU and XLRE, but they are worth our attention next week.
The industry group to Watch comes from Utilities, the Water group. I definitely found some symbols with promise in this group that I'll share in that section.
See you next week!
Good Luck & Good Trading,
Erin
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Our latest DecisionPoint Trading Room recording (8/21):
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:
Revolution Medicines Inc (RVMD)
EARNINGS: 11/06/2023 (AMC)
Revolution Medicines, Inc. is a clinical-stage precision oncology company focused on developing novel targeted therapies. It engages in the discovery and development of cancer treatment by pioneering novel combination and monotherapy treatment regimens to maximize the depth and durability of clinical benefit and circumvent adaptive resistance mechanisms for patients which are dependent on the RAS and mTOR pathway. The company was founded by Mark A. Goldsmith, Kevan Shokat, Martin D. Burke, David L. Pompliano and Michael Fischbach in October 2014 and is headquartered in Redwood City, CA.
Predefined Scans Triggered: New CCI Buy Signals.
Below are the commentary and chart from yesterday (8/24):
"RVMD is unchanged in after hours trading. Here we have a short-term bullish double bottom that has been confirmed with the breakout above the prior high. The RSI is positive and not overbought. The PMO didn't surge above the signal line, it whipsawed back into a Crossover BUY Signal which I believe is also very positive. The OBV is definitely confirming this rally and Stochastics are rising strongly in positive territory. Relative strength is improving nicely. I've set the stop beneath the 20-day EMA at 6.9% or $29.62."
Here is today's chart:
This reader request had a great trading day to add onto the already strong rally. The RSI is overbought now and price has hit overhead resistance so it may need to cool. That would offer a better entry. Indicators are very positive so a breakout does seem imminent.
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:
Bausch & Lomb Corp. (BLCO)
EARNINGS: 11/01/2023 (BMO)
Bausch + Lomb Corp. develops, manufactures, and markets eye health products. It offers over-the-counter supplements, eye care products, ophthalmic pharmaceuticals, contact lenses, lens care, ophthalmic surgical devices, and instruments. The company operates its business through three segments: Vision Care/Consumer Health Care, Ophthalmic Pharmaceuticals and Surgical. The Vision Care/Consumer Health Care segment includes both contact lens and consumer eye care businesses. The Ophthalmic Pharmaceuticals segment consists of a broad line of proprietary pharmaceutical products for post-operative treatments and treatments for a number of eye conditions, such as glaucoma, eye inflammation, ocular hypertension, dry eyes and retinal diseases. The Surgical segment consists of medical device equipment, consumables and instrumental tools and technologies for the treatment of corneal, cataracts, and vitreous and retinal eye conditions, and includes IOLs and delivery systems, phacoemulsification equipment and other surgical instruments and devices necessary for cataract surgery. Bausch + Lomb was founded by John Jacob Bausch and Henry Lomb in 1853 and is headquartered in Vaughan, Canada.
Predefined Scans Triggered: Entered Ichimoku Cloud and Shooting Star.
Below are the commentary and chart from 8/22:
"BLCO is unchanged in after hours trading. I see that this one was a pick at the end of March this year. While it didn't do spectacularly after being picked, it did see a nice bull market move. The stop was never hit. I like how the chart is shaping up again. Price turned back up before actually testing support at the 200-day EMA and $17.50 level. That is a good sign. The RSI is positive now and the PMO just triggered a Crossover BUY Signal today. The OBV is confirming the rally. Stochastics are now above net neutral (50) and rising. Relative strength for the group has been pretty good and it needs to be given the underperformance of the SPY. BLCO is a strong leader within the group right now so we will look for this winner to keep on winning. The stop is set at about the 200-day EMA at 7.9% or $17.90."
Here is today's chart:
I have no idea what hit this stock so hard as they did have strong earnings in Q2. Something is amiss and this stock should not be held onto unless you are comfortable with a break below support at the 200-day EMA. The RSI and PMO are very negatively configured. In fact, the PMO topped bearishly below the zero line. This was a dizzying reversal and one that the chart definitely did not predict.
THIS WEEK's Sector Performance:
DecisionPoint Sector Scoreboard (Mechanical Trend Model Signals):
Click Here to view Carl's annotated "Under the Hood" ChartList!
Sector to Watch: Utilities (XLU)
This was last week's Sector to Watch given price was on very strong support and begged for another reversal. Upside potential is somewhat limited to the trading range, but price is at the bottom of the range. As noted in the opening, the PMO is now rising; it wasn't last week. There is a slight increase in %Stocks > 20EMA that is encouraging. Given that indicator and %Stocks > 50EMA are holding higher percentages than the Silver Cross Index, we should see it begin rising soon. Stochastics are rising, but we aren't seeing much in the way of relative strength currently. Tread carefully in this defensive sector.
Industry Group to Watch: Water ($DJUSWU)
I like the bounce of support. It does have some overhead resistance to deal with and indicators are only now getting positive, sort of. The PMO has just turned up today. The RSI is still negative, but is rising. Stochastics are now making their way up and out of weak territory below 20. This could turn out to be a reverse flag so be sure that you set stops if you go into this group. A few stock symbols in this area that are worth a look: CDZI, AWK and CWCO.
The other group I looked at today in the Diamond Mine was Residential REITs. I'm not including the chart, but I did want to give you the symbols I found in that group that looked appealing: AVB, EQR, ELS, MAA, IRT and UDR.
Go to our Under the Hood 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 5% long, 0% short.
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 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 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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