The market rallied strongly today on good news regarding inflation. It has opened up quite a few candidates in the Diamonds Scans.
I picked stocks from four different sectors. Real Estate led the day so I have one of those for you. I liked Financials going into the week and found an insurance company that looks interesting. I have a popular Industrial sector chart and finally a stock from Technology which generally leads the market.
I will say that the "Magnificent 7" stocks all look very bullish. This will lead the market higher and any of these stocks could be "Diamonds in the Rough" right now: MSFT, TSLA, GOOGL, AAPL, NVDA, META and AMZN.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": CAT, ERIE, SBRA and TEAM.
Runners-up: AMR, COHU, RRX, THRM, UFPT and BLMN.
RECORDING LINK (11/10/2023):
Topic: DecisionPoint Diamond Mine (11/10/2023) LIVE Trading Room
Passcode: November#10
REGISTRATION for 11/17/2023:
When: Nov 17, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (11/17/2023) LIVE Trading Room
Register in advance for this webinar HERE
After registering, you will receive a confirmation email containing information about joining the webinar.
Here is the last recording from 11/13:
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.
Caterpillar, Inc. (CAT)
EARNINGS: 01/30/2024 (BMO)
Caterpillar, Inc. engages in the manufacture of construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives. It operates through the following segments: Construction Industries, Resource Industries, Energy and Transportation, Financial Products, and All Other. The Construction Industries segment supports customers using machinery in infrastructure and building construction applications. The Resource Industries segment is responsible for supporting customers using machinery in mining and quarrying applications and it includes business strategy, product design, product management and development, manufacturing, marketing, and sales and product support. The Energy and Transportation segment supports customers in oil and gas, power generation, marine, rail, and industrial applications. The Financial Products segment offers a range of financing alternatives to customers and dealers for caterpillar machinery and engines, solar gas turbines, as well as other equipment and marine vessels. The All Other segment includes activities such as the business strategy, product management and development, and manufacturing of filters and fluids, undercarriage, tires and rims, engaging tools, and fluid transfers. The company was founded on April 15, 1925, and is headquartered in Irving, TX.
Predefined Scans Triggered: P&F Low Pole.
CAT is up +0.04% in after hours trading. Price is reversing off strong support and only experienced a mild pullback. I like that the 50-day EMA is above the 200-day EMA, giving it a bullish bias in the long term. It's now ready to roll. The RSI is now in positive territory and there is a new PMO Crossover BUY Signal. Stochastics are rising strongly and should get above 80 shortly. Relative strength is improving for the group and for CAT. I've set the stop below support at 6.6% or $231.50.
This is indeed a strong support level when we review it on the weekly chart. The weekly RSI is still negative, but it is rising again. The rest of the chart needs help so consider this a short-term trade for now. The weekly PMO is still declining and the StockCharts Technical Rank (SCTR) is below the hot zone* above 70.
*If a stock 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.
Erie Indemnity Co. (ERIE)
EARNINGS: 02/28/2024 (AMC)
Erie Indemnity Co. engages in the insurance business and operates as an attorney-in-fact. It manages affairs at the Erie Insurance Exchange for the benefit of the policyholders. It covers policies in auto and leisure, home and property, life, and business insurance. The company was founded by Henry Orth Hirt and Ollie Grover Crawford on April 4, 1925, and is headquartered in Erie, PA.
Predefined Scans Triggered: Bullish MACD Crossovers.
ERIE is unchanged in after hours trading. This one is a little early given the PMO hasn't given us a Crossover BUY Signal yet, but I liked the arrangement of the EMAs and its membership in the Financial sector. Admittedly in recent weeks, the group hasn't performed in stellar fashion, but overall the relative strength line is rising. Price turned up on strong support and has now overcome both the 20/50-day EMAs. This essentially prevented a Dark Cross of the 20/50EMAs. The RSI just moved into positive territory and the PMO is rising. Stochastics aren't quite in positive territory but they are rising nicely. The stop is set beneath support at 6.7% or $268.86.
The weekly chart is shaping up. The weekly PMO is still technically in decline, but it has decelerated and remains on a Crossover BUY Signal. The weekly RSI is positive and the SCTR is comfortably within the hot zone above 70. It is near all-time highs so consider an upside target of about 17% to $337.16.
Sabra Healthcare REIT Inc. (SBRA)
EARNINGS: 02/20/2024 (AMC)
Sabra Health Care REIT, Inc. engages in the business of acquiring, financing, and owning real estate property. The company was founded on May 10, 2010 and is headquartered in Irvine, CA.
Predefined Scans Triggered: New CCI Buy Signals, P&F Double Top Breakout and P&F Triple Top Breakout.
SBRA is unchanged in after hours trading. This was another stock that was already showing a bullish bias based on the configuration of the EMAs. Price is coming up against overhead resistance but given the positive indicators, I'm expecting a breakout. The RSI is positive, rising and not overbought. The PMO is nearing a Crossover BUY Signal. Stochastics are nearly above 80. The stop is set beneath the 50-day EMA at 6.5% or $13.60.
The weekly chart's only problem is that overhead resistance here is very strong, but as I noted above, the daily chart certainly suggests it will break out. The weekly RSI is positive and not yet overbought. The weekly PMO surged above the signal line last month and is rising. It isn't that overbought. The SCTR is in the hot zone. Upside potential if it reaches its all-time high is over 23%.
Atlassian Corp. (TEAM)
EARNINGS: 02/01/2024 (AMC)
Atlassian Corp. is a holding company, which engages in providing team collaboration and productivity software. Its software helps teams organize, discuss, and complete shared work. Its products include Jira Software, Confluence, Jira Service Management, and Trello. The company was founded by Michael Cannon-Brookes and Scott Farquhar in October 2002 and is headquartered in San Francisco, CA.
Predefined Scans Triggered: Elder Bar Turned Green, Bullish MACD Crossovers, P&F Double Top Breakout, P&F Triple Top Breakout and P&F Quadruple Top Breakout.
TEAM is up +0.17% in after hours trading. Price broke out from a bullish falling wedge today. The 50-day EMA is above the 200-day EMA so it has a long-term bullish bias. The RSI just moved into positive territory and the PMO is nearing a Crossover BUY Signal. Stochastics are rising vertically. The Software group has been performing exceptionally well and although TEAM hasn't, it is beginning to see a little outperformance now. I think it will benefit from being a member of the strong Technology sector and Software group. The stop is set arbitrarily at 7.3% or $172.60.
The weekly chart is improving and does imply we could consider this in the intermediate term. The weekly RSI just moved into positive territory and the SCTR is in the hot zone now. The weekly PMO is bottoming. Even if it just reaches the top of the recent trading range, it would be a nice 17%+ profit.
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 70% long, 0% short. I now own CAT and TEAM.
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
(c) Copyright 2023 DecisionPoint.com
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