As with yesterday, scans were skewed toward Financials with sector funds arriving as well as Regional Banks (KRE) and Insurance (KIE). The other theme was dividend and preferred stock ETFs. I don't trust this rally fully so I didn't include any of those. I do however, like KIE and KRE which I will present today.
The last ETF is a play on the Crude Oil and Energy trades. MLP & Energy Equipment ETF (MLPX) looks like a good way to take advantage of this strength.
The scans were plentiful but the problem I have is that most of the ETFs were in the same category as my list includes many index ETFs and various other versions of them. Like I mentioned earlier the scans do suggest that we should trust this current rally. We shall see.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": KIE, KRE and MLPX.
RECORDING & DOWNLOAD LINK (4/19/2024):
Topic: DecisionPoint Diamond Mine (4/19/2024) LIVE Trading Room
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When: Apr 26, 2024 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (4/26/2024) 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.
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: Hollow Red Candles.
KIE is down -0.23% in after hours trading. We have a giant bull flag formation that immediately caught my eye. The breakout is confirming the pattern and suggests we could see a move that is the height of the flagpole! I don't think that will happen, but it certainly makes this one interesting in the intermediate term. The RSI is positive and not at all overbought. The PMO is curling up toward a Crossover BUY Signal. Stochastics just moved into positive territory. Relative strength looks good, but I do note a good portion of the outperformance came during its decline which was not as hefty as the SPY. Still this is positive. The stop is set at the 200-day EMA at 7.9% or $45.74.
The weekly chart shows a positive weekly RSI and a StockCharts Technical Rank (SCTR) that is in the hot zone* above 70. I do not like the weekly PMO configuration, but a solid rally will get the PMO to turn back up. Consider a 17% upside target to about $58.11.
*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 Regional Banking ETF (KRE)
EARNINGS: N/A
KRE tracks an equal-weighted index of US regional banking stocks. Click HERE for more information.
Predefined Scans Triggered: None.
KRE is unchanged in after hours trading. At first I wasn't going to present KRE, but then I looked under the hood and had to present it. Not only is the RSI positive and the PMO on a new Crossover BUY Signal, but participation has exploded. The Silver Cross Index is seeing a Bullish Shift through the signal line. %Stocks > 20/50/200EMAs has shot to the top. Stochastics are also rising and should get above 80 soon. I've set the stop below support at 7.6% or $45.28.
The weekly chart looks pretty good considering price is in a declining trend. The weekly RSI is positive and rising. The SCTR is in the hot zone above 70, in fact at the very top of the hot zone. The weekly PMO is a problem so keep this one short-term for now.
Global X MLP & Energy Infrastructure ETF (MLPX)
EARNINGS: N/A
MLPX tracks an index of MLPs and companies engaged in energy infrastructure. The ETF is structured as an open-ended fund. Click HERE for more information.
Predefined Scans Triggered: P&F Double Top Breakout and P&F Triple Top Breakout.
MLPX is unchanged in after hours trading. As noted in the opening, I like the Crude Oil and Energy trades right now and this fits right in. It could be due for a small pullback as we haven't seen a decline since this rally started. If we get a major top before seeing resistance broken, watch out as that would set up a bearish double top. For now I see a bull flag with a confirming breakout. The RSI is positive and not overbought. The PMO has bottomed well above the zero line and Stochastics are rising strongly in positive territory. I also like the outperformance. I've set the stop halfway between the next two levels of support at 6.5% or $45.88.
The weekly chart suggests we can invest in this in the intermediate-term timeframe. The weekly RSI is positive and the weekly PMO is on a Crossover BUY Signal. The OBV has ticked up as more investors hop on this trade. The SCTR is at the top of the hot zone. Consider a 17% upside target around $57.41.
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 20% 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