Today's picks offer some great upside potential with nice chart setups. I fished from the same industry group on two because they charts really offered great upside potential.
I wasn't that pleased with most of the scan results today so I don't have any runners-up for you, just the three "Diamonds in the Rough".
I base upside potential on price reaching the next line of resistance in the intermediate and long terms. Getting into a stock is fairly easy, getting out is tricky. Setting upside targets gives you at least an area for reevaluating an investment. We do it on the down side, but rarely on the upside.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": ADNT, AXL and SMCI.
RECORDING LINK (9/1/2023):
Topic: DecisionPoint Diamond Mine (9/1/2023) LIVE Trading Room
Passcode: September#1
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When: Sep 8, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (9/8/2023) LIVE Trading Room
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Here is the last recording from 8/28 - No recording on Labor Day:
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.
Adient plc (ADNT)
EARNINGS: 11/02/2023 (BMO)
Adient plc manufactures automotive seating systems. It operates through the following geographical segments: Americas, EMEA, and Asia. The company was founded in 1985 and is headquartered in Plymouth, MI.
Predefined Scans Triggered: P&F High Pole
ADNT is down -2.66% in after hours trading which does give me pause, but it could offer a better entry if the indicators don't break down. The RSI is negative given today's decline, but a rally will fix that. The PMO is rising toward a Crossover BUY Signal. I noticed a major OBV positive divergence with price leading into the current rally. Stochastics just moved above 80 and relative strength is rising in most cases. I've set the stop at 6.5% or $36.89.
The weekly chart is acceptable, but not enough to consider this an intermediate-term investment. Keep this one short-term. Upside potential is over 20% if it reaches those prior tops but could be even higher if it challenges the 2021 high. The weekly RSI is positive and the weekly PMO is nearing a Crossover BUY Signal. The StockCharts Technical Rank (SCTR) is not healthy and below the hot zone* which is one reason why we would want this to be a short-term trade not longer-term investment.
*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.
American Axle & Manufac. (AXL)
EARNINGS: 11/03/2023 (BMO)
American Axle & Manufacturing Holdings, Inc. engages in the manufacture, engineering, design, and validation of driveline systems and related components. It operates through the following segments: Driveline and Metal Forming. The Driveline segment consists of axles, drive shafts, power transfer units, rear drive modules, and electric and hybrid driveline products and systems for light trucks, service utility vehicles, crossover vehicles, passenger cars, and commercial vehicles. The Metal Forming segment manufactures axle shafts, ring and pinion gears, differential gears, transmission gears, and shafts and suspension components for original equipment manufacturers (OEMs), and Tier 1 automotive suppliers. The company was founded by Richard E. Dauch on March 1, 1994 and is headquartered in Detroit, MI.
Predefined Scans Triggered: Bullish 50/200-day MA Crossovers.
AXL is unchanged in after hours trading. Similar to ADNT above, price is scooping up higher. Today saw a breakout above the 20-day EMA and a new PMO Crossover BUY Signal. Stochastics are above 80 and the RSI has just moved into positive territory. I do like relative strength better on AXL as it is rising strongly versus ADNT. Obviously, I believe both have merit. The stop is set at 6.5% or $7.33.
This isn't what I like to see on a weekly chart...a trading range. On the bright side, it is near the bottom of the range and that is why upside potential is so nice. I think this should be a short-term trade versus intermediate-term investment given a similar low SCTR number like ADNT. However, it does have positive attributes given the weekly RSI is nearing positive territory and the weekly PMO is nearing a whipsaw Crossover BUY Signal.
Super Micro Computer, Inc (SMCI)
EARNINGS: 10/31/2023 (AMC)
Super Micro Computer, Inc. engages in the distribution and manufacture of information technology solutions and other computer products. Its products include twin solutions, MP servers, GPU and coprocessor, MicroCloud, AMD solutions, power supplies, SuperServer, storage, motherboards, chassis, super workstations, accessories, SuperRack and server management products. The company was founded by Charles Liang, Yih-Shyan Liaw, Sara Liu, and Chiu-Chu Liu Liang in September 1993 and is headquartered in San Jose, CA.
Predefined Scans Triggered: Hollow Red Candles, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
SMCI is down -0.10% in after hours trading. We have a bullish double bottom pattern that will be confirmed when price overcomes the last top. The RSI is positive even with today's decline. The PMO is rising toward a Crossover BUY Signal. Volume is coming in on this rally. Stochastics are rising and are near 80. I like the relative performance of the group to the SPY. SMCI isn't a leader per se based on relative strength, but it is outperforming the SPY with room for improvement. I set the stop below the 50-day EMA at about 8% or $257.85.
I like the weekly chart with the exception of the weekly PMO which is trying to give us a negative crossover. It got hit hard on that decline and it is still having ramifications for the PMO. The weekly RSI is positive and the SCTR is as high as you can get at 99.9 which tells me this could be considered an intermediate-term investment. Upside potential is excellent should it reach the all-time high.
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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 40% long, 0% short. All four of today's Diamonds in the Rough are possibilities for tomorrow's trading day.
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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Watch the latest episode of DecisionPoint Trading Room 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."
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.
Helpful DecisionPoint Links:
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
For more links, go to DecisionPoint.com