It was another ETF Day that required me to go outside of my scans. There simply weren't enough results and therefore I perused my gigantic ETF ChartList and ETF Tracker (Tracker is available to subscribers using the ChartLists on the lefthand side of the Blogs and Links page).
Having reviewed so many ETFs today I learned a few things. First, the market is definitely overbought. The majority of ETFs had PMOs that had been rising for some time and many of them had begun to decelerate or turn over. Second, inverse ETFs looked the most desirable. I selected the inverse Energy ETF (ERY) based on today's loss of support by XLE. I think a few hedges couldn't hurt using SOXS or SQQQ or SDOW. Just keep them very short-term. They aren't investments, they are hedges and should be managed with a very short time horizon.
Be careful with longs right now. I have two ETFs on the buy side, but I am not adding to my portfolio now.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": ERY, JETS and MSOS.
Runner-ups: UUP, DUG and ZSL.
RECORDING LINK (12/1/2023):
Topic: DecisionPoint Diamond Mine (12/1/2023) LIVE Trading Room
Passcode: December#1
REGISTRATION for 12/8/2023:
When: Dec 8, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (12/8/2023) 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 12/4:
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 Energy Bear 2x Shares (ERY)
EARNINGS: N/A
ERY provides 2x inverse exposure to a market-cap-weighted index of US large-cap companies in the energy industry. Click HERE for more information.
Predefined Scans Triggered: New CCI Buy Signals, Moved Above Upper Bollinger Band, Stocks in a New Uptrend (Aroon), Moved Above Upper Price Channel, Parabolic SAR Buy Signals and P&F Double Top Breakout.
ERY is up +0.43% in after hours trading. Today price broke above overhead resistance at the 200-day EMA. The RSI is positive and the PMO has just generated a Crossover BUY Signal. Stochastics look especially bullish as they rise vertically in positive territory. It is outperforming the SPY right now. This is leveraged, so position size wisely. If you have a 2x bear fund, you may want to double your stop level due to the volatility. I've opted not to this time around. The stop is set at 6.9% or $27.91.
The weekly chart shows us that ERY has been traveling mostly in a trading range all year. It is currently in the middle of the range. The weekly RSI has moved into positive territory and the weekly PMO is on a Crossover BUY Signal. There is no StockCharts Technical Rank (SCTR) on ERY so the hot zone* doesn't apply here. Upside potential is over 29% should it reach the top of the range.
*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.
US Global Jets ETF (JETS)
EARNINGS: N/A
JETS invests in both US and non-US airline companies. This concentrated portfolio is weighted towards domestic passenger airlines. Click HERE for more information.
Predefined Scans Triggered: Moved Above Upper Price Channel and P&F Low Pole.
JETS is down -0.10% in after hours trading. I like the rally and recent breakaway gap. Price is back above the 200-day EMA and in a nice rising trend. We have a recent Silver Cross of the 20/50-day EMAs. The PMO continues to rise. The RSI has entered overbought territory, but we know those conditions can persist in a lengthy rally. There is an overhead resistance zone arriving so it may consolidate above the 200-day EMA before a breakout. Stochastics have topped but are above 80 signaling internal strength. The group is outperforming the SPY right now. The stop is set at 7.4% or $16.86.
The weekly chart is very favorable and definitely suggests a move to the 2023 top. The weekly RSI just entered positive territory and the weekly PMO is rising toward a Crossover BUY Signal. The SCTR is not in the hot zone yet, but it is rising vertically. Upside potential is almost 24% if it reaches resistance.
AdvisorShares Pure US Cannabis ETF (MSOS)
EARNINGS: N/A
MSOS is an actively managed narrow portfolio of US stocks or swap contracts related to the domestic cannabis and hemp industry. Click HERE for more information.
Predefined Scans Triggered: Moved Above Upper Bollinger Band, Moved Above Ichimoku Cloud and Moved Above Upper Price Channel.
MSOS is up +0.13% in after hours trading. I like the breakout from what appears to be a bullish flag. Normally I don't like sideways flags, but this one formed a bullish ascending triangle pattern thus making it more likely to fire which it did. The RSI is rising and isn't overbought yet. The PMO is on a Crossover BUY Signal and is beginning to accelerate with price. Stochastics are rising above 80 and relative strength is picking up. The stop is set at 7.9% or $6.99.
The weekly chart is very favorable, but this tends to be a volatile area of the market so I would keep my time horizon very short on this one. The weekly RSI is positive and rising, far from overbought. The weekly PMO is rising strongly after an earlier "surge" or bottom above the signal line. The SCTR is at the top of the hot zone. Upside potential is over 31% should it hit the next level of overhead resistance.
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 65% 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
(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