I was lukewarm on yesterday's "Diamonds in the Rough" but they had a tremendous day with two of them up well over 2%. Today's ETF selections are good to go. I don't have any runner-ups today, but the three I chose should do well moving forward.
Both the Communication Services Sector (XLC) and Industrials Sector (XLI) showed up in the results today. While they look good, I wanted to give you better selections.
I noticed a few inverse ETFs come through, SQQQ and TECS which are bearish plays on the QQQ and the Technology Sector (XLK). I'm not bearish enough to go there right now. I'm more interested in setting and adhering to stop levels. Let the market stop you out at this point. Yesterday's terrible decline was followed by a good rally day. Our expectation was lower prices so there could be more upside to take advantage of. I'd go easy on portfolio expansion.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": ITA, KIE and KSA.
RECORDING & DOWNLOAD LINK (2/9/2024):
Topic: DecisionPoint Diamond Mine (2/9/2024) LIVE Trading Room
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Passcode: February#9
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When: Feb 16, 2024 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (2/16/2024) LIVE Trading Room
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Here is the latest recording from February 12th. Click HERE to subscribe to the DecisionPoint YouTube Channel to be notified when new content is available.
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.
iShares U.S. Aerospace & Defense ETF (ITA)
EARNINGS: N/A
ITA tracks a market-cap-weighted index of US manufacturers, assemblers and distributors of airplane and defense equipment. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Green.
ITA is up +0.16% in after hours trading. It is getting close to overhead resistance, but the indicators are lined up to suggest a breakout ahead. This ETF was hit by the Boeing problems, but that seemed to have been somewhat overdone and a rally has ensued off support. The RSI is positive and not overbought. The PMO is flat, but this implies a nice rising trend in place. The PMO is above the zero line and on a Crossover BUY Signal. Stochastics turned up just above 80. While it isn't outperforming by a mile, it is traveling mostly in line with the SPY and for now, that is good enough. The stop can be set thinly at 5.7% or $118.17.
This bounce is coming off very long-term support as well. The weekly RSI is positive and not overbought. The weekly PMO is rising on a Crossover BUY Signal. The StockChart Technical Rank (SCTR) just entered the hot zone* above 70. Consider a 17% upside target to $146.62.
*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.
SPDR S&P Insurance ETF (KIE)
EARNINGS: N/A
KIE tracks an equal-weighted-index of insurance companies, as defined by GICS. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Green, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
KIE is down -0.02% in after hours trading. This industry group has been an excellent performer out of the October low. It is nice that despite this rally, the RSI is not overbought. There is a new PMO Crossover BUY Signal and Stochastics are above 80. Price is at resistance but this is a good setup. The ETF is outperforming the market right now. Consider a tight 4.7% stop to $45.96.
2023 was a good year for KIE and this year is shaping up to be profitable as well. The one problem I see is the overbought RSI. The weekly PMO however is not overbought and is rising on a Crossover BUY Signal. The SCTR is in the hot zone above 70. Consider a 17% upside target to around $56.43.
iShares MSCI Saudi Arabia Capped ETF (KSA)
EARNINGS: N/A
KSA tracks a market-cap-weighted index of Saudi Arabian firms covering 99% of the market cap spectrum. Click HERE for more information.
Predefined Scans Triggered: Moved Above Upper Keltner Channel, New 52-week Highs, Moved Above Upper Price Channel, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
KSA is unchanged in after hours trading. I like the recent breakout from the prior trading range. A bearish double top was averted and that is especially bullish. The RSI is positive and not overbought. There is a new PMO Crossover BUY Signal and Stochastics are rising above 80. Volume has been steadily rising based on the OBV. It is currently outperforming the market. Consider a 6.3% stop around $41.27.
The weekly chart is strong and suggests this could be a more intermediate-term investment rather than just a short-term trade. The weekly RSI is positive and not overbought. This was a great breakout above very strong resistance. The PMO is rising and is not overbought on its Crossover BUY Signal. Finally, the SCTR is in the hot zone. Consider a 17% upside target to about $51.54.
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'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