As I was poring over the scan results today I noticed that not all of them were showing improving relative strength against the group and in some cases the SPY. I did a good job of weeding some of those stocks out, but I wanted to let you know that relative strength is probably the least important of the indicators I have on daily charts.
Price is king and price patterns are of primary concern. Momentum is key after that. Internal strength as measured by Stochastics would be the next important indicator, followed by the RSI (is price overbought?). I like to then look at volume patterns based on the OBV. The last thing I look for is relative strength against the SPY followed by strength against the group and then the group's relative strength.
Relative strength is excellent to see, but it is an area where you can compromise. I say this because relative strength can change on a dime with a good rally or two.
I won't compromise on the PMO rising and I prefer to avoid any stock with declining Stochastics (unless they are above 80). Fortunately my scans help me find the right conditions, but I don't scan on relative strength. It is on my radar as I would like to come up with a good way to scan for strong relative performers within an industry group.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": CABO, CRWD, OLED and ZS.
Runners-up: INTU, R, RGNX, GFS, NAVI, ODFL and POWL.
RECORDING LINK (11/3/2023):
Topic: DecisionPoint Diamond Mine (11/3/2023) LIVE Trading Room
Passcode: November#3
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When: Nov 10, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (11/10/2023) LIVE Trading Room
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Here is the last recording from 11/6:
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.
Cable One, Inc. (CABO)
EARNINGS: 02/22/2024 (AMC)
Cable One, Inc. engages in the provision of data, video, and voice services to residential and business customers. It provides consumers with an array of communications and entertainment services, including Internet and wireless fiber solutions, cable television and phone service under the brand name Sparklight. The company was founded in 1986 and is headquartered in Phoenix, AZ.
Predefined Scans Triggered: Bullish MACD Crossovers.
CABO is down -0.07% in after hours trading. I liked today's breakout above both the 20-day EMA and horizontal support at the May low. Next up is the 50-day EMA. The RSI is positive and not overbought. The PMO is nearing a Crossover BUY Signal and Stochastics are rising in positive territory. The group is performing in line with the SPY. CABO is beginning to outperform the group and the SPY. The stop is set at 7.2%, about halfway down the trading range, around $562.13.
CABO dribbled below support, but it is recapturing it on the weekly chart. The weekly RSI is negative, but the weekly PMO is on a Crossover BUY Signal and rising. The StockCharts Technical Rank (SCTR) needs some help. Keep this one in a short-term timeframe until the SCTR begins improving and moving toward 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.
CrowdStrike Holdings, Inc. (CRWD)
EARNINGS: 11/28/2023 (AMC)
CrowdStrike Holdings, Inc. provides cybersecurity products and services to stop breaches. It offers cloud-delivered protection across endpoints, cloud workloads, identity and data, and threat intelligence, managed security services, IT operations management, threat hunting, Zero Trust identity protection, and log management. CrowdStrike serves customers worldwide. The company was founded by George P. Kurtz, Gregg Marston, and Dmitri Alperovitch on November 7, 2011, and is headquartered in Austin, TX.
Predefined Scans Triggered: New CCI Buy Signals, New 52-week Highs, P&F Spread Triple Top Breakout, Stocks in a New Uptrend (Aroon), Moved Above Upper Price Channel and P&F Double Top Breakout.
CRWD is unchanged in after hours trading. Today price broke out above overhead resistance. It is in a nice rising trend out of the August low that is confirmed by the OBV's rise. The RSI is positive, rising and not overbought. There is a brand new PMO Crossover BUY Signal. Stochastics have just moved past 80. Relative strength is excellent across the board for CRWD. The stop is set below the 20-day EMA at 6.9% or $179.08.
The weekly chart tells me this could be considered for an intermediate-term investment not just a short-term trade. The weekly RSI is positive and the weekly PMO is rising on a Crossover BUY Signal and is not overbought. The SCTR is at the top of the hot zone. I would look for an upside target at the 2022 high.
Universal Display Corp. (OLED)
EARNINGS: 02/22/2024 (AMC)
Universal Display Corp. engages in the research, development, and commercialization of organic light emitting diode (OLED) technologies and materials. It also develops and licenses proprietary OLED technologies to manufacturers of products for display applications, such as cell phones, portable media devices, tablets, laptop computers and televisions, and specialty and general lighting products. The company was founded by Sherwin I. Seligsohn in 1994 and is headquartered in Ewing, NJ.
Predefined Scans Triggered: Parabolic SAR Buy Signals, P&F Low Pole and Entered Ichimoku Cloud.
OLED is unchanged in after hours trading. The "V" Bottom pattern drew my attention on OLED. The expectation of the pattern, after it retraces price up 1/3rd, is a breakout above the left side of the "V". The RSI just entered positive territory and the PMO is rising toward a BUY Signal. Volume is really coming in on the rally. Stochastics are rising strongly, but aren't above 50 yet. Relative strength for the group is terrible, but OLED is bucking that trend by outperforming on its own. The stop is set between the 200-day EMA and support at $135.00 at 7.1% or $140.39.
The weekly chart is mixed so keep this one in the short-term timeframe for now. The weekly RSI is positive and rising, but the weekly PMO is in decline on a Crossover SELL Signal. The SCTR is nearly in the hot zone which is promising. I've set the upside target about halfway up the next trading range.
Zscaler, Inc. (ZS)
EARNINGS: 12/07/2023 (AMC)
Zscaler, Inc. engages in the provision of a cloud-based internet security platform. It offers Zero Trust Exchange, Zscaler Client Connector, Zscaler Internet Access, Zscaler Private Access, Zscaler B2B, Zscaler Cloud Protection, and Zscaler Digital Experience. The company was founded by Jagtar Singh Chaudhry and K. Kailash in September 2007 and is headquartered in San Jose, CA.
Predefined Scans Triggered: P&F Double Top Breakout and P&F Triple Top Breakout.
ZS is down -0.02% in after hours trading. I like that price decided to reverse before having to test support at the September low. Today it broke out and closed above overhead resistance at the price tops from this summer. The RSI is positive, rising and not overbought. The PMO is nearing a Crossover BUY Signal. Stochastics are rising in positive territory. Relative strength is great for the Software group right now and ZS is beginning to outperform the group and consequently the SPY. The stop is set beneath the 50-day EMA at 7.7% or $158.93.
I definitely like the weekly chart. The weekly RSI is positive and rising. The weekly PMO has surged above the signal line (bottomed above the signal line). Volume is steady based on the OBV and the SCTR is at the top of the hot zone. I am looking for price to challenge the early 2021 top.
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 60% long, 0% 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