It's ETF Day where I bring you three ETF "Diamonds in the Rough". There were clearly two themes that presented themselves today. I will be covering each in today's selections. I was pleased to see one of the themes as it tells me that Crude Oil is ready to move higher. There was also an Energy ETF, but I opted for the Oil ETF.
The second theme was Financials. The Bank ETF showed up as well as XLF which I have opted to present. It's only flaw is that it is overbought right now, but it is showing pure strength that cannot be ignored. If you like leveraged ETFs, FAS is the 3x Bull Financial ETF.
The third selection is the Cybersecurity ETF (BUG). I expect this to do well as long as the market holds up. Be sure to set a stop if you take a stab at it.
The market isn't showing much weakness right now so I do expect these ETFs to do well. However, if the market takes a serious turn to the downside, all positions will need to be evaluated if their stops do not hit.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": BNO, BUG and XLF.
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Topic: DecisionPoint Diamond Mine (3/15/2024) LIVE Trading Room
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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.
United States Brent Oil Fund (BNO)
EARNINGS: N/A
BNO tracks the Brent oil spot price using near-month ICE futures contracts. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Green, New CCI Buy Signals, Moved Above Upper Bollinger Band and Parabolic SAR Buy Signals.
BNO is down -0.20% in after hours trading. Today's rally really changed the face of the Crude Oil trade. It appears ready to make its way higher again. Overhead resistance doesn't arrive until about $33. The RSI is positive and not overbought. The PMO has triggered a Crossover BUY Signal above the zero line. Stochastics reversed higher today. We are even seeing some outperformance by BNO. The stop is set below the 200-day EMA at 6.1% or $28.71.
The weekly chart is shaping up with the exception of the StockCharts Technical Rank (SCTR) which is well outside the hot zone* above 70. The positive weekly RSI is not at all overbought. The weekly PMO has just generated a Crossover BUY Signal. This has promise in the intermediate term, but I'd feel better about it if the SCTR would cooperate. Consider an upside target of about 21% to overhead resistance.
*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.
Global X Cybersecurity ETF (BUG)
EARNINGS: N/A
BUG tracks a modified market-cap-weighted global index of companies selected on the basis of revenue related to cybersecurity activities. Click HERE for more information.
Predefined Scans Triggered: P&F Double Top Breakout.
BUG is down -0.87% in after hours trading. This was the only result from my Diamond PMO Scan and it looks pretty good. The RSI is positive and not overbought at all. There is a new PMO Crossover BUY Signal on the way above the zero line. This is new strength. Stochastics are above 80 and we are seeing outperformance against the SPY. A market decline would likely hit this one hard so set your stop. I've set it at 6.3% below the prior low at about $28.96.
The weekly chart is favorable, but I would like to see the PMO rising more. Still, it appears we have a PMO Surge above the signal line (bottom above the signal line). The SCTR is in the hot zone. Consider a 17% upside target to about $36.16.
Financial Select Sector SPDR Fund (XLF)
EARNINGS: N/A
XLF tracks an index of S&P 500 financial stocks, weighted by market cap. Click HERE for more information.
Predefined Scans Triggered: Moved Above Upper Keltner Channel, New 52-week Highs, P&F Double Top Breakout and P&F Bullish Triangle.
XLF is down -0.02% in after hours trading. We an 'under the hood' chart for XLF so let's dig in. First we have a beautiful rising trend just as in the SPY. The PMO is flat above the signal line signaling "pure strength". The RSI is overbought, but it has been able to maintain those conditions for some time earlier in the rally. Participation indicators and the Silver/Golden Cross Indexes are about as high as you can get. Unfortunately it does mean that the only place left is likely down, but for now these readings tell me XLF can continue to rally. Stochastics are above 80 and relative strength is rising against the SPY. I've set a deep stop to the prior level of support. Not so sure I'd hold it all the way down though. The stop is at 7.9% or $37.90.
I like the breakout to new all-time highs. The weekly RSI is incredibly overbought, but we've seen this condition before and it wasn't fatal. The weekly PMO is rising on a Crossover BUY Signal and is not overbought. The SCTR is in the hot zone. This could be considered for an intermediate-term investment. Consider an upside target of 17% to $48.16.
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 75% 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