Welcome to ETF Day in DecisionPoint Diamonds. It wasn't too hard to pick today's ETF "Diamonds in the Rough" as the scans and the overall market environment pointed the way.
One area of the market that is cruising is Energy, Crude Oil is on a run with the start of the war and we believe it will continue to rise. There are plenty of ETFs that will take advantage of the rising prices. I didn't include DIG which is the ultra Oil ETF. Those that are more risk oriented may want to go there. I opted to go with the SPDR for Exploration and Production (XES).
Interest rates are on the rise again and PFIX the Interest Rate Hedge ETF found its way into the scans. However, an interesting way to play high interest rates is the ETF TYO which is the ultrashort for the 7-10 year Bonds.
The final choice is Consumer Staples (XLP). This beat down sector hasn't been an area I would go to, but we are seeing some signs of life and if the market struggles with rising rates, it could find more favor.
I only have one reader request for tomorrow! Would love to get more! Just email me at erin@decisionpoint.com.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": TYO, XES and XLP.
Runners-up: DIG, FTGC, COMT, HDV and RISR.
RECORDING LINK (10/13/2023):
Topic: DecisionPoint Diamond Mine (10/13/2023) LIVE Trading Room
Passcode: October@13th
REGISTRATION for 10/20/2023:
When: Oct 20, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (10/20/2023) LIVE Trading Room
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Here is the last recording from 10/16:
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.
Direxion Daily 7-10 Year Treasury Bear 3x Shares (TYO)
EARNINGS: N/A
TYO provides daily -3x exposure to a market-value weighted index of U.S. Treasury bonds with remaining maturities between 7 and 10 years.
Predefined Scans Triggered: New 52-week Highs, Moved Above Upper Bollinger Band, Moved Above Upper Price Channel and P&F Double Top Breakout.
TYO is down -0.06% in after hours trading. We continue to be very bearish on Bonds so this inverse leveraged ETF should be very successful. It is running hot on this week's rally, but fundamentally we do expect rates to move higher and that will put downside pressure on Bonds. The rally is decidedly parabolic as it continues to increase its line of ascent, but we feel this will continue to occur until the Fed finally eases. The RSI is positive and the PMO has just triggered a Crossover BUY Signal. Stochastics have just moved above 80. We should continue to see excellent outperformance given 3x leverage. The stop is set below support at 7.8% or $15.20.
The weekly chart shows us how important this week's breakout is. It has overcome long-term overhead resistance. If it makes it to the next level of resistance that would be an over 22% gain. The problems would be the overbought weekly RSI and weekly PMO. However, in a strong bull market, those conditions can and will persist.
SPDR S&P Oil & Gas Equipment & Services ETF (XES)
EARNINGS: N/A
XES tracks an equal-weighted index of companies in the oil & gas equipment and services sub-industry of the S&P Total Market Index. Click HERE for more information.
Predefined Scans Triggered: P&F Low Pole and Entered Ichimoku Cloud.
XES is up +0.50% in after hours trading. Price bounced off strong support on news of the war. The rally continues and given Crude Oil's rally, I would look for higher prices. The RSI is in positive territory and the PMO is nearing a Crossover BUY Signal. Stochastics are rising in positive territory. This ETF has been outperforming since the rally began. I've set the stop near support at 7.6% or $88.00.
The weekly chart is mixed. The weekly PMO is the problem right now as the weekly RSI is positive and volume based on the OBV is confirming the rally off 2023 lows. The StockCharts Technical Rank (SCTR) is at the very top of the hot zone* above 70. I believe it will recapture the 2019 high for an over 26% gain.
Consumer Staples Select Sector SPDR Fund (XLP)
EARNINGS: N/A
XLP tracks a market-cap-weighted index of consumer-staples stocks drawn from the S&P 500. Click HERE for more information.
Predefined Scans Triggered: P&F Double Bottom Breakdown.
XLP is down -0.16% in after hours trading. This chart reminds me of what happened to Utilities (XLU). It was incredibly beat down and then did an about face to form an extended rally. We have a double-bottom with today's breakout confirming the pattern. The minimum upside target should take price above the 50-day EMA. Notice that participation has been expanding as far as %Stocks > 20EMA. The Silver Cross Index still needs help, but the RSI is rising and the PMO just triggered a Crossover BUY Signal. Stochastics are rising and relative strength is picking up. I like that I can set a very thin stop of 4.8% at $64.76.
This bounce is coming off strong support. The weekly indicators look terrible so we need to keep this one in the short-term timeframe for now. The weekly RSI is at least rising, but is quite negative. The weekly PMO has decelerated the decline but is still declining almost vertically. If it can recapture the prior highs, it would be an over 13% gain which isn't bad considering the stop can be set thinly.
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 55% long, 2% 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.
"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 3:00p 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