The scan results weren't plentiful, but of the results there were three clear themes to exploit. Let me talk about the market a little bit first. Internals are still fairly strong, but we aren't seeing much enthusiasm (volume) on the rallies which gives us a sense that the market is vulnerable right now.
With that in mind I found it interesting that one of the themes was value and dividend funds. If the market weakens somewhat, this will be a good place to take advantage. Defensive areas of the market will be outperforming.
The second theme was Energy related MLP funds. I found one that seems to do better than the others.
The final theme was Financials including the Financials ETF (XLF) which I'll be presenting. Mobile payments and Fintech ETFs were also in the results, but the sector itself looked the strongest.
You'll notice that some of these funds have been underperforming the market. Over the long haul most are still outperforming. We're looking to take advantage of some reversal type plays so they may have some underperformance issues.
I opted not to add to my portfolio, but yesterday's are still on my list for possible adds including EME which I think looked the best of the four I presented yesterday. I don't always have a favorite, but when I do, I'll let you know. Please do not think those will be sure things. Nothing is.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": AMJ, VYM and XLF.
Runners-up: AMLP, MLPX, DLN, MTUM and NOBL.
RECORDING & DOWNLOAD LINK (5/3/2024):
Topic: DecisionPoint Diamond Mine (5/3/2024) LIVE Trading Room
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When: May 10, 2024 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (5/10/2024) 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.
JPMorgan Alerian MLP Index ETN (AMJ)
EARNINGS: 07/12/2024 (BMO)
AMJ tracks a market-cap-weighted index of North American energy infrastructure MLPs. Click HERE for more information.
Predefined Scans Triggered: Moved Above Upper Price Channel, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
AMJ is down -1.11% in after hours trading. Today saw a small breakout above near-term resistance. The PMO is triggering a Crossover BUY Signal above the zero line. The RSI is positive and Stochastics are above 80. Notice the nice rise in the OBV to confirm this rally. Of late it hasn't been performing very well in relation to the SPY, but over the longer term it is angling upward. It's now testing that rising relative trend and is bouncing. The stop doesn't have to be too deep at 6.6% or $26.86.
At first glance you may think there is a problem with the weekly PMO as it is looking close to a Crossover SELL Signal. However, it is very flat above the zero line and that implies pure strength. Unfortunately the weekly RSI has moved into overbought territory, but it has managed to camp out there recently without too much trouble. The StockCharts Technical Rank (SCTR) is in the hot zone* above 70. Consider a 17% upside target to $33.65.
*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.
Vanguard High Dividend Yield ETF (VYM)
EARNINGS: N/A
VYM tracks the FTSE High Dividend Yield Index. The index selects high-dividend-paying US companies, excluding REITS, and weights them by market cap. Click HERE for more information.
Predefined Scans Triggered: P&F Bear Trap, Moved Above Ichimoku Cloud and P&F Double Top Breakout.
VYM is up +0.28% in after hours trading. We have a small breakout above the last price top. You could make a case for a double bottom formation. The second low should be further down but ultimately this does have the appearance of a bottoming pattern. The RSI is positive and not overbought. The PMO just gave us a Crossover BUY Signal. Stochastics are above 80. This one also has not been performing well of late, but the relative strength line is bouncing off a rising trend. The stop is set beneath the 200-day EMA at 6.8% or $110.52.
This looks like a flag formation and price is working its way out of the flag. The weekly RSI is positive and the weekly PMO is attempting to bottom above the signal line. The SCTR is not actually in the hot zone, but it is close and it is rising. Consider a 17% upside target to about $138.75.
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 Ichimoku Cloud, Moved Above Upper Price Channel, P&F Double Top Breakout and P&F Bullish Triangle.
XLF is down -0.10% in after hours trading. I like the recent breakout above the prior top combined with excellent under the hood indicators. There is a new PMO Crossover BUY Signal, the RSI is positive and Stochastics are above 80. The increased participation in this sector shows %Stocks > 20/50/200EMAs at over 77% which is bullish. The Silver Cross Index is going in for a positive crossover its signal line. This Bullish Shift would give XLF a bullish bias in the intermediate term. I've opted to put the stop below support at 6.2% or $38.79.
This bounce is coming off strong support at the 2022 high. The weekly PMO is bearish so keep this short-term for now. The weekly RSI is positive at least and we see a SCTR well inside the hot zone. Consider a 17% upside target to about $48.39.
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 30% long, 0% short. Still debating yesterday's four and today's three.
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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Watch the latest episode of DecisionPoint Trading Room with Carl & Erin Swenlin Mondays on the DecisionPoint YouTube channel here!
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