I wasn't feeling that positive about "Diamonds in the Rough" earlier in the week. The doubt was apparently unfounded as all but three "Diamonds in the Rough" finished with advances this week. You'll notice on the spreadsheet that prior weeks are looking good with the exception of the week of 1/30.
The market continues to inch higher as we climb the wall of worry. At this point we should let the market stop us out. Most of us are running profits right now and a good stop level will protect you. Try to set stops below support levels if possible. I've opted to go with trailing stops on my positions as I was getting frustrated having to move them up continually. At this point I think trailing stops will work to my benefit.
The Sector to Watch was difficult to choose again this week with it coming down to Materials (XLB) and Energy (XLE). I opted to go with Energy based on the Silver Cross Index. It looks excellent on XLE and negative on XLB. It was clear that the aggressive sectors were beginning to show signs of stress. At this point I'm watching for rotation into other areas of the market and so far this seems to be working.
The Industry Group to Watch could have been any in Energy with the exception of Coal which looks very bearish. I opted to go with Pipelines. I have an ETF that follows Pipelines but it is very low volume and could be manipulated somewhat. Use at your own discretion.
The big winner this week was Badger Meter (BMI) which was up just over 5% on the week. The "Dud" was Matson Inc and based on the deterioration on the chart, it is the only "Diamond in the Rough" that has a bearish Sparkle Factor.
We ran two scans at the end of the program and I was able to pull out the following stock symbols for your review: BXP, DEI, NBR, ALV, HES, SPXC and XOM.
Have a great three day weekend! There will be no free DP Trading Room on Monday due to the holiday.
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:
Badger Meter, Inc. (BMI)
EARNINGS: 04/18/2024 (BMO)
Badger Meter, Inc. engages in the provision of flow measurement, control products, and communications solutions that serve water utilities, municipalities, and commercial and industrial customers worldwide. Its products are classified into two categories: Municipal Water and Flow Instrumentation. Municipal water products include water meters and related technologies to municipal water utilities. Flow Instrumentation products include meters and valves sold worldwide to various industries for water and other fluids. The company was founded in 1905 and is headquartered in Milwaukee, WI.
Predefined Scans Triggered: Hollow Red Candles and P&F Double Top Breakout.
Below are the commentary and chart from Tuesday, 2/13:
"BMI is unchanged in after hours trading. It had a bad day but finished with a bullish hollow red candlestick. This means price closed above the open, just not higher than the day before. This looks like a breakout followed by a mechanical pullback. The RSI did move down with today's decline but it remains in positive territory. The PMO has given us a Crossover BUY Signal. Stochastics are rising in spite of the decline. Relative strength lines are rising as we want against the SPY. BMI is doing very well against the group. I've set the stop beneath support at 7.2% or $139.10."
Here is today's chart:
Today saw a new Silver Cross of the 20/50-day EMAs. Resistance has been hit so there is the possibility we will see some consolidation or small decline, but the indicators are just getting better so a breakout seems the most likely. I believe seeing Stochastics rising on a decline in the above chart was part of the success of this pick.
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:
Matson, Inc. (MATX)
EARNINGS: 02/20/2024 (AMC)
Matson, Inc. is a holding company, which engages in the provision of logistics and transportation services. It operates through the Ocean Transportation and Logistics segments. The Ocean Transportation segment offers ocean freight transportation, container stevedoring, refrigerated cargo services, inland transportation, and other terminal services. The Logistics segment includes domestic and international rail intermodal services, regional highway brokerage, specialized hauling, expedited freight operations, supply chain management, storage, and distribution services. The company was founded in 1882 by William Matson and is headquartered in Honolulu, HI.
Predefined Scans Triggered: Hollow Red Candles.
Below are the commentary and chart from Tuesday, 2/13:
"MATX is unchanged in after hours trading. I would have preferred a breakout then a pullback as this could turn into a bearish double top. It may be a good idea to see how this one trades before jumping in right away for that reason. The PMO is what sold me on it as a "Diamond in the Rough"; it is nearing a Crossover BUY Signal well above the zero line which signals pure strength. Stochastics are above 80 and relative strength lines are all rising. The stop has been set around the 50-day EMA at 7.3% or $111.40."
Here is today's chart:
I think the problem with this pick was the possible double top that was setting up. The pattern hasn't been confirmed, but it is enough to say goodbye to this stock. I'm not sure what today's big decline was about, but it is certainly an attention flag to get out.
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)
Energy saw a great looking breakout yesterday and while it didn't finish higher to finish the day, I am still expecting a breakout. The Silver Cross Index is what sold me on this chart as it is accelerating higher. We have seen an incredible expansion in stocks above their 20-day EMA and there is still room to expand further. The Golden Cross Index should begin rising as we have more stocks above both their 50/200-day EMAs as compared to the Golden Cross Index. Stochastics are rising, the PMO is accelerating higher and the RSI is positive and not overbought.
Industry Group to Watch: Pipelines (UMI)
I could've picked other groups within Energy, but I liked the breakout on Pipelines combined with the new PMO Crossover BUY Signal. As noted in the opening, this ETF does have low volume, but it does show the strength coming in on this group. I like that you can set a thin stop. Stochastics look very bullish and we can see that the group is starting to outperform the SPY.
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 70% long, 0% short. I own HOG, COHU and AMPH.
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."
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DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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