It was a good week for "Diamonds in the Rough" despite them being skewed to the defensive side versus the aggressive side of tech. Based on the look of the sectors this morning, rotation does seem to be moving more defensively with those defensive sectors seeing new momentum. This week's picks in Consumer Staples should serve us well if I'm right.
This week's "Darling", Sprouts Farmers Market (SFM) hit it big on earnings results with the stock up almost 11% today. This week's "Dud" was looking like Cal-Maine Foods (CALM), but it was replaced by Host Hotels (HST). It's interesting because I still very much like HST and do own it right now.
I was going to pick Real Estate (XLRE) as the Sector to Watch but taking a look under the hood I discovered a sharply declining Silver Cross Index and not very good participation yet. While it is new momentum, I decided to go with Consumer Staples (XLP)
I am keeping the Industry Group to Watch as Retail REITs. The two symbols uncovered this morning were SPG and NNN. A group to watch inside Consumer Staples would be Food Products. Three Diamonds on Tuesday were from this group, K, MKC and CALM.
We had a chance to run a few scans and I was able to find some candidates for your review: ADC, CMG (I own), EQH, NDSN, ODFL (I own), STLD (I own) and XYL. As you can see I opted to expand my exposure after being previously stopped out. We'll see how these hang in there. Please don't buy these just because I own them. "Diamonds in the Rough" are not 'sure things'.
I will be doing a free presentation on using the PMO to find "pure strength" on February 29th, Thursday at 12:45 ET. There will be other presentations that day as well and you should receive information when you register. I'd love for you to sign up HERE. I should be able to put a recording together for registrants.
Have a great weekend! I'll see you in the free DecisionPoint Trading Room on Monday at Noon ET.
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:
Sprouts Farmers Market Inc. (SFM)
EARNINGS: 02/22/2024 (AMC)
Sprouts Farmers Market, Inc. engages in the operation of healthy grocery stores. The firm specializes in fresh, natural and organic products. Its products include fresh produce, bulk foods, vitamins and supplements, grocery, meat and seafood, deli, bakery, dairy, frozen foods, body care and natural household items. The company was founded by Stan Boney, Shon Alexander Boney, and Kevin K. Easler on July 11, 2002 and is headquartered in Phoenix, AZ.
Predefined Scans Triggered: New 52-week Highs, Filled Black Candles, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
Below are the commentary and chart from Tuesday, 2/20:
"SFM is down -0.38% in after hours trading. We do have a bearish filled black candlestick today and with after hours trading down, you should be able to pick this one up at a lower price point. It has been a consistent winner. The RSI is positive and not yet overbought. There is a new PMO Crossover BUY Signal in motion. Stochastics are above 80. This industry group has been performing well of late and if you're going to fish from this group, SFM is a good selection as it consistently outperforms the group. I've set the stop below support at 7.6% or $49.03."
Here is today's chart:
There was the opportunity to pick this one up on a decline on Wednesday or even on the small rally Thursday before today's big jump. Of course that would've meant holding through earnings, but the chart was set up bullishly enough that I would've considered it. Now it feels like chasing. This is a good pop though and should see follow through, I just think you may've seen much of the move already.
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:
Host Hotels & Resorts Inc. (HST)
EARNINGS: 02/21/2024 (AMC) ** Reported Yesterday **
Host Hotels & Resorts, Inc. is a real estate investment trust, which engages in the management of luxury and upper-upscale hotels. It operates through the following geographical segments: United States, Brazil and Canada. The company was founded in 1927 and is headquartered in Bethesda, MD.
Predefined Scans Triggered: New 52-week Highs, P&F Double Top Breakout and Hanging Man.
Below are the commentary and chart from Thursday, 2/22:
"HST is down -1.55% in after hours trading so a better entry is likely tomorrow. This was the stock that was requested twice. I liked the breakout to new 52-week highs today. I annotated it on the weekly chart, but this looks like a breakout from a bull flag formation that implies much higher prices ahead. The RSI is positive and not overbought. There is a brand new PMO Crossover BUY Signal. Stochastics are above 80 and still rising. HST is outperforming the market and the group is outperforming as well. HST must make up the lion's share of this group as its relative strength to the group is a bit weird looking. The stop is set around the 50-day EMA at 7.3% or $19.15."
Here is today's chart:
I still like this chart. The one big problem with today's decline is that it brought the PMO lower. We also have a big bearish engulfing candlestick to deal with. I think this is just a fine opportunity to get in on a pullback which is why I did so. This was an industry group that looked healthy this morning when we reviewed the sector. This "Dud" isn't really bearish.
THIS WEEK's Performance:
DecisionPoint Market Scoreboard (Mechanical Trend Model Signals):
Click Here to view Carl's annotated "Under the Hood" ChartList!
Sector to Watch: Consumer Staples (XLP)
I was impressed with today's breakout move. After yesterday's big tech breakout, it does seem strange to be heralding a defensive sector, but you can't ignore the increase in participation on this steady rally higher. The new PMO Crossover BUY Signal above the zero line suggests we will see more upside. The Silver Cross Index has turned up and based on %Stocks > 20/50EMAs we should see it continue to move higher. Stochastics look good and I do see at least a rising trend coming together on relative strength.
Industry Group to Watch: Retail REITs ($DJUSRL)
This is brand new momentum coming in. There is a double bottom pattern that technically was confirmed with yesterday's breakout above the confirmation line. The RSI remains positive despite today's decline. Stochastics are above 80. Relative strength is currently in a rising trend, but it could disappear if we don't get a breakout above overhead resistance. Two symbols to consider from this area: SPG and NNN.
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 CMG, ODFL, HST and STLD.
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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