The market internals, particularly PMOs within the index, have been displaying plenty of weakness, but today's market rally brought with it two interesting sectors to keep on the radar. While most of the market is seeing damage, both Communication Services and Technology are showing new positive momentum. Typically when this happens we will see a resulting or continuing rally. The dichotomy of weak internals combined with sectors that inspire growth has us wondering if the decline will actually happen. Read more in the DP Weekly Wrap later this evening.
I am still holding off adding to my portfolio as I'm not convinced we will avoid a more determined decline. However, for those with a higher risk tolerance, some very short-term additions could work in your favor. I would hold off on any hedges until we get more information regarding whether growth sectors will stay bullish.
I chose Technology (XLK) as the Sector to Watch this morning with Computer Services being the Industry Group to Watch. I found some good symbols in the group to take a look at.
I was able to run a few scans this morning and we uncovered a few symbols of interest from the results: AGYS, GOOGL and GPC.
Have a great weekend!
Good Luck & Good Trading,
Erin
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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:
ServiceNow, Inc. (NOW)
EARNINGS: 01/24/2024 (AMC)
ServiceNow, Inc. engages in the provision of enterprise cloud computing solutions. The firm delivers digital workflows on a single enterprise cloud platform called the Now Platform. Its product portfolio is focused on providing Information Technology, Employee and Customer workflows. The company was founded by Frederic B. Luddy in June 2004 and is headquartered in Santa Clara, CA.
Predefined Scans Triggered: P&F Double Top Breakout.
Below are the commentary and chart from Tuesday 1/16:
"NOW is up +0.20% in after hours trading. I really like this chart given the recent breakout and price's ability to stay above prior resistance. The RSI is positive and not yet overbought. The PMO is nearing a Crossover BUY Signal. Volume is solid based on the rising OBV. Stochastics are above 80. Relative strength is improving for NOW against both the group and the SPY. I've suggested a 7.9% stop around $670.08."
Here is today's chart:
Today did see a bearish filled black candlestick. It could be vulnerable to some decline given the overbought RSI, but overall the chart still looks healthy and should see some upside follow through. This one can handle overbought conditions so further upside is likely in spite of the current RSI reading.
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:
ETFMG Alternative Harvest ETF (MJ)
EARNINGS: N/A
MJ tracks an index of global firms engaged in the legal cultivation, production, marketing or distribution of cannabis, cannabinoids or tobacco products. The portfolio is weighted by market cap or equally based on a proprietary system. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Blue.
Below are the commentary and chart from Wednesday, 1/17:
"MJ is up +1.16% in after hours trading. Price has broken out from overhead resistance at the December tops and the 200-day EMA. Today saw a mechanical pullback to the breakout point. The RSI is positive and not overbought. The PMO is rising despite today's big decline and is not overbought. Stochastics are also still rising in spite of today's big decline. This ETF is seeing outperformance against the SPY. The stop is set at the 50-day EMA at 7.4% or $3.20. Note that this is VERY low-priced so position size wisely."
Here is today's chart:
It may've turned out to be this week's "Dud", but I don't think we should count out MJ. It is still maintaining a rising trend channel and other than Stochastics, the indicators look favorable. I've listed this one with a Neutral Sparkle Factor as this is a very volatile ETF. It is certainly a "hold" and I think it has some merit as an add for those with a higher risk tolerance.
THIS WEEK's Performance:
DecisionPoint Market Scoreboard (Mechanical Trend Model Signals):
Click Here to view Carl's annotated "Under the Hood" ChartList!
Sector to Watch: Technology (XLK)
Technology was last week's Sector to Watch and it did turn out to be worth watching. I cannot ignore the strong positive chart for XLK. The rally does look a bit overdone, but the internals are excellent. The RSI is overbought, but that condition can persist in a bull market like XLK is in. The PMO is on a new Crossover BUY Signal and participation of stocks above their 20/50/200-day EMAs is reading well above our 50% bullish threshold. This bullish chart has me rethinking my bearish stance on the market.
Industry Group to Watch: Computer Services ($DJUSDV)
Interestingly, I picked Computer Services again for Industry Group to Watch. It was hard not to given the bullish chart with a beautiful breakaway gap. The RSI is on the overbought side, but given it has maintained that condition before, I won't penalize it. There is a new PMO Crossover BUY Signal and Stochastics have turned back up above 80. I see more upside for this group. Symbols we found of interest: IT, IBM, PSFE and CSPI (I loved CSPI, but it is a very low volume stock and that took some of the shine off).
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 65% long, 0% 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."
Helpful DecisionPoint Links:
DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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