The market is in decline and it is taking away nearly all pockets of strength. This week "Diamonds in the Rough" didn't fare well. They were down on average slightly more than the SPY. On the bright side, I do feel that there are some positions that should firm up over the next week or two.
This week's "Darling" was AeroVironment (AVAV) which is in the Defense group. This group will likely stand out as a pocket of strength primarily due to the war. Finding companies that supply munitions, etc. should hold strength.
This week's "Dud" was Vornado Realty Trust (VNO) which hit its stop yesterday. It had a great chart setup, just appears that we should've waited for a PMO Crossover BUY Signal.
The Sector to Watch remains Consumer Staples (XLP) from today's Diamond Mine. I don't have high hopes here, I listed our "Diamond in the Rough" XLP as a Neutral going forward. It is the only sector that looks to have some hopes of rising next week. Even Energy (XLE) lost a great deal of participation under the hood and doesn't fit the bill as the Sector to Watch as it does appear ready to correct again. Crude Oil could bail that sector out though. XLP should see rotation given the difficult market, but if it can't right itself, it is going to be a long arduous decline.
Short positions should serve us well. This morning NVDIA (NVDA) looked ripe for a short. We did uncover some symbols that you may want to look at moving forward. Coca-Cola (KO) looked especially bullish this morning as well as Mondelez (MDLZ) in Food Products. I have three more symbols for you from our Industry Group to Watch, Nondurable Household Products.
I was able to temporary fix my spreadsheet issue from this morning, but my spreadsheet is barely limping along. Let's pray it holds up longer.
Have a great weekend!
Good Luck & Good Trading,
Erin
RECORDING LINK (10/20/2023):
Topic: DecisionPoint Diamond Mine (10/20/2023) LIVE Trading Room
Passcode: October@20
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Topic: DecisionPoint Diamond Mine (10/27/2023) LIVE Trading Room
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Our latest DecisionPoint Trading Room recording (10/16):
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:
AeroVironment Inc. (AVAV)
EARNINGS: 12/05/2023 (AMC)
AeroVironment, Inc. engages in the design, development, production, support and operation of unmanned aircraft systems and electric transportation solutions. The company was founded by Paul B. MacCready, Jr. in July 1971 and is headquartered in Arlington, VA.
Predefined Scans Triggered: None.
Below are the commentary and chart from 10/17:
"AVAV is up +1.26% in after hours trading. I'm not sure what the gap up was about, but price is now retracing back to the intraday high on that gap day. The earlier filled black candlestick did not result in bearish activity. We have a positive and not overbought RSI. The PMO is nearing a new Crossover BUY Signal. Stochastics are rising strongly toward 80. Relative strength kicked up for the group on the news of war and I do think that will continue to fuel this group. AVAV is a leader within the group based on relative strength. The stop is set beneath support at 6% or $108.83."
Here is today's chart:
It is currently struggling a bit with overhead resistance, but the chart has matured nicely since Tuesday. The PMO continues to rise and the RSI remains positive. Stochastics aren't as bullish as I'd like moving forward, but they are fine to keep this one as a hold. Outperformance could be the key to why this one survived a rough week.
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:
Vornado Realty Trust (VNO)
EARNINGS: 10/30/2023 (AMC)
Vornado Realty Trust is a real estate investment trust, which engages in the ownership of office, retail, merchandise mart properties, and other real estate and related investments. It operates through the New York and Other segments. The company was founded by Steven Roth on March 29, 1993 and is headquartered in New York, NY.
Predefined Scans Triggered: Bullish MACD Crossovers.
"VNO is down -0.58% in after hours trading. This one intrigued me due to the reverse head and shoulders pattern that implies price should return to the September high. The RSI just moved into positive territory and the PMO has turned up. Stochastics are in positive territory and are rising again. It is still holding onto its "Silver Cross" (20EMA > 50EMA). If the group decides to get going, this is the stock to be in based on its solid relative strength against the group. For now, we are content to see slight outperformance against the SPY. The stop is set at 7.6% or $20.69."
Here is today's chart:
This one fell prey to a bad market. While it was a reversal candidate, it had a very good setup with the reverse head and shoulders. We didn't have a PMO BUY Signal when this was picked and the industry group wasn't faring that well. Both must have worked against it. It rallied today, but the chart doesn't look healthy enough for a hold.
THIS WEEK's Performance:
DecisionPoint Market Scoreboard (Mechanical Trend Model Signals):
Click Here to view Carl's annotated "Under the Hood" ChartList!
Sector to Watch: Consumer Staples (XLP)
In this morning's Diamond Mine XLP was up. It finished the day down and unfortunately what was improving participation has turned into decreasing participation. The price pattern is the most bullish of all of the sectors as it does hold a short-term rising trend. If any sector will do well, this one should. If it doesn't the market is in deep trouble. This is a highly defensive sector and if rotation isn't moving here, then money is simply leaving equities altogether and that is the problem.
Industry Group to Watch: Nondurable Household Products ($DJUSHN)
After reaching the 200-day EMA, price has pulled back. Stochastics have also topped, so this isn't perfect. Pockets of strength are getting difficult to uncover. However, the rest of the chart is bullish enough with the positive RSI and PMO Crossover BUY Signal. I was able to find three different symbols in this area that looked promising: CHD, ENR and KMB.
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 20% 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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