We higher on the week and had we not had one particularly bad position, we would've been up even more. What you may find interesting is that I've got a bullish Sparkle Factor on all of the positions this week. I believe all of them have merit moving forward.
The Darling this week was the ultra Natural Gas ETF (BOIL) which was up over 8.8% today. I like Natural Gas moving forward, but keep a close eye on overhead resistance.
The Dud was YANG, the China Bear 3x ETF. It was down -7.79% since being picked on Wednesday. We'll discuss its prospects below.
I thought long and hard about the Sector to Watch this week and industry group. I don't think it is cheating, but ultimately the best strength by far is owned by Technology and Semiconductors. I didn't see the type of expansion in participation I wanted to see in Healthcare. Communication Services look good, but the industry groups were thin. I believe the META and GOOGL are driving XLC higher, not broad participation. If I'm right about a rally next week, this sector and industry group will likely lead the way. If not, time to pivot and rethink Healthcare given it is a defensive area of the market.
Two industry groups we "mined" today in the Diamond Mine were Media Agencies and Healthcare Providers. I only found one symbol in Media Agencies, THRY. I liked RDNT, UNH and CNC in Healthcare Providers.
Good Luck & Good Trading,
Erin
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Our latest DecisionPoint Trading Room recording (10/2):
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:
ProShares Ultra Bloomberg Natural Gas (BOIL)
EARNINGS: N/A
BOIL provides 2x the daily return of an index that measures the price performance of natural gas as reflected through publicly traded natural gas futures contracts.
Predefined Scans Triggered: New CCI Buy Signals, Moved Above Upper Bollinger Band, Moved Above Upper Price Channel, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
Below are the commentary and chart from yesterday (10/5):
"BOIL is up +0.30% in after hours trading. This is for the risk taker given it is a 2x ETF. The reader asked if it was overbought. I don't think so given the RSI is positive and not above 70. It was an extraordinary day for BOIL as Nat Gas is finally seeing another rally. The PMO is giving us an oversold BUY signal. It's the first BUY signal since early August. Be careful though, these signals have been arriving shortly before another decline. Stochastics are rising vertically and should be above 80 soon. Again, think very short-term as these signals have been arriving late to the party. The stop has to be set deeply and really could be set deeper since this is a 2x coverage. Think double the stop level you would put on UNG. I've opted to go with a 13.1% stop around $54.95."
Here is today's chart:
As I noted in the opening, overhead resistance is key here. I would likely jump out as soon as it reaches that level as it is a trading range that has persisted for some time. I wouldn't count on a breakout for that reason. Maybe we'll get lucky, but you can see the RSI is already getting overbought. I'd likely turn this selection off on the spreadsheet fairly quickly if I were to follow-up on the positions.
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:
Direxion Daily FTSE China Bear 3x Shares (YANG)
EARNINGS: N/A
YANG provides daily 3x inverse leveraged exposure to a market-cap-weighted index of the 50 largest Chinese stocks traded in Hong Kong.
Predefined Scans Triggered: P&F Double Top Breakout and Bullish 50/200-day MA Crossovers.
Below are the commentary and chart from Wednesday (10/4):
"YANG is down -0.74% in after hours trading. I've used this short ETF a few times with success during market declines. It should be considered a hedge and traded in the very short term. We have a price breakout combined with positive indicators. The RSI is positive and not overbought. The PMO is rising on a BUY Signal. The OBV is rising and confirming the rising price trend. Stochastics are above 80. It has been an excellent performer against the SPY. I've set the stop very thinly considering this is a 3x inverse so adjust accordingly. It's set at the 200-day EMA at 8.5% or $11.16."
Here is today's chart:
I could've marked the Sparkle Factor as Neutral on YANG due to the PMO topping. However, I left it bullish because both rising bottoms trendlines are intact. I still believe this ETF will serve us as a decent hedge. If you didn't get in on Thursday, wait this out on your watch list. The market had a killer rally today and that put this one in the red by a lot today. There's still promise, we just have to wait out the likely rally next week.
THIS WEEK's Performance:
DecisionPoint Sector Scoreboard (Mechanical Trend Model Signals):
Click Here to view Carl's annotated "Under the Hood" ChartList!
Sector to Watch: Technology (XLK)
XLK broke back above the 50-day EMA today. The PMO had already been rising. The RSI is now in positive territory. Most important are the "under the hood" indicators. The Silver Cross Index is turning back up. %Stocks > 20/50EMAs expanded and are working their way toward our bullish 50% threshold. The sector has been outperforming. The Golden Cross Index is accelerating lower so this strength will likely fade quickly. I think this week we'll see a rally and it will be led by this sector.
Industry Group to Watch: Semiconductors (SMH)
I have the benefit of "under the hood" indicators for this industry group and I'm glad I do as it shows new strength coming back in. We have nearly a quarter of the group with price above their 20EMA. The Silver Cross Index has paused its decline. Stochastics are rising nicely and relative strength is picking up for the group. Two symbols to consider: NVDA and AMD.
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 10% long, 6% 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."
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Swenlin Trading Oscillators (STO-B and STO-V)
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