Yesterday it was all about the defensive Consumer Staples sector. Today Friday's Sector to Watch, Energy led the sectors. The market looks vulnerable so we will be carrying yesterday's defensive theme into ETF Day.
I have the Food & Beverage ETF (FTXG) which takes advantage of new strength in Food Products. There is a low volatility/high dividend ETF (LVHD) that will be skewed toward dividend paying stocks like those in Consumer Staples and Energy. Finally, the last ETF had a strong chart, probably the best one today for the Global Infrastructure ETF (IGF).
Tomorrow is Reader Request Day so get those requests in soonest! Test yourself, find a chart that looks like "Diamond in the Rough" material and see if it gets picked!
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": FTXG, IGF and LVHD.
Runner-ups: FXE and USRT.
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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.
First Trust Nasdaq Food & Beverage ETF (FTXG)
EARNINGS: N/A
FTXG follows a liquidity-selected, multi-factor-weighted index of US food & beverage companies. Click HERE for more information.
Predefined Scans Triggered: None.
FTXG is unchanged in after hours trading. I like the double bottom pattern that is forming. It is early on this ETF as the indicators are only just maturing. The declining trend hasn't been broken yet, but should be soon if the indicators are correct. The RSI just moved into positive territory. The PMO is approaching a Crossover BUY Signal. Stochastics have just risen into positive territory like the RSI. You can set a thin stop, thinner than this one if you choose given where support is. I've got it at 4.9% or $22.66.
I spotted a bullish flag formation on the weekly chart. The weekly RSI is almost in positive territory. The weekly PMO looks very interesting as it appears it is beginning to bottom or surge above the signal line. The StockCharts Technical Rank (SCTR) is terrible, well outside the hot zone* above 70. Keep this one short-term.
*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.
iShares Global Infrastructure Index ETF (IGF)
EARNINGS: N/A
IGF tracks a market-cap-weighted index of global infrastructure companies. Click HERE for more information.
Predefined Scans Triggered: None.
IGF is down -0.20% in after hours trading. This ETF is heavy Utilities which is a defensive area of the market like Consumer Staples. This ETF will take advantage of rotation into defensive areas of the market. Price has broken out of a bullish falling wedge. The RSI is positive and not overbought. The PMO is nearing a Crossover BUY Signal. Stochastics are strong and we can see this ETF is beginning to outperform the market. You can set a thin stop on this one too at 4.7% or $43.44.
I'm not thrilled with the weekly chart so keep this short-term. While the weekly RSI has moved above net neutral (50) and the weekly PMO is trying to turn up, this has been a range bound ETF and it could get stopped at overhead resistance. The SCTR is improving but is well outside the hot zone. Consider an upside target of about 17% to $53.34.
Legg Mason Low Volatility High Dividend ETF (LVHD)
EARNINGS: N/A
LVHD tracks an index of roughly 50-100 US stocks selected from across the market cap spectrum. Stocks are selected and weighted to emphasize profitability, high dividends, low price volatility and low earnings volatility. Click HERE for more information.
Predefined Scans Triggered: None.
LVHD is down -0.71% in after hours trading. I liked today's breakout from the declining trend channel. This is an early pick as the PMO is barely maturing right now, but it does look as though it will go in for a Crossover BUY Signal. The RSI just hit positive territory and Stochastics are rising toward 80. The ETF is beginning to outperform the market somewhat. I've set another thin stop at 5% or $33.56.
This weekly chart is similar to the other two and suggests we should keep this in the short-term timeframe. We could be looking at a bull flag, but the flag is getting too extended. Price did not test the top of the channel before heading lower. The indicators are good with the exception of the low SCTR. The weekly RSI hit positive territory and the weekly PMO is bottoming above the signal line. Consider a 17% upside target around $41.34.
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 55% 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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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