NVDA earnings couldn't help the market today and that doesn't bode well. We were already starting to see cracks in the foundation in the DP Alert and it now looks as though we will finally see another leg down. One reader is already on top of this as she requested three different shorting vehicles.
One of the requests that I won't be covering is DUST which is the Gold Miners inverse. I think it is an excellent trade right now, but it will be very short-term in nature. In response to the precipitous decline though, I have turned off last week's GDXJ trade at a 1.17% loss.
The other two shorts are the inverse of Small-Caps (TZA) and the Real Estate bear fund (REK). She included the three times bear Real Estate (DRV) as well. I chose to not use the leverage.
Our final pick is a boom or bust kind of stock. Today e.l.f. Beauty (ELF) was up over 18% on earnings. I typically don't include stocks like this, but the setup suggests we will see follow through.
Tomorrow is the Diamond Mine trading room! Be sure to register now!
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": ELF, REK and TZA.
Other requests: DUST, DRV, ENV, GNRC, KLAC, VRT, PFE and GE.
RECORDING & DOWNLOAD LINK (5/17/2024):
Topic: DecisionPoint Diamond Mine (5/17/2024) LIVE Trading Room
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Passcode: May#17th
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When: May 24, 2024 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (5/24/2024) LIVE Trading Room
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Here is the latest recording from 5/20. Click HERE to subscribe to the DecisionPoint YouTube Channel to be notified when new content is available.
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.
e.l.f. Beauty, Inc. (ELF)
EARNINGS: 05/22/2024 (AMC) ** Reported Yesterday **
e.l.f. Beauty, Inc. is a holding company, which engages in the provision of cosmetic and skin-care products. The company focuses on the e-commerce, national retailers, and international business channels. Its brands include elf, elf skin, WELL People and KEYS soulcare. The company was founded in 2004 and is headquartered in Oakland, CA.
Predefined Scans Triggered: Elder Bar Turned Green, New CCI Buy Signals, Gap Ups, Bullish MACD Crossovers, Moved Above Upper Bollinger Band, Moved Above Upper Price Channel, Parabolic SAR Buy Signals, Entered Ichimoku Cloud, P&F Double Top Breakout and Strong Volume Gainers.
ELF is up +0.30% in after hours trading despite an almost 19% gain today. This suggests follow through as do the indicators on this incredible breakout move. The RSI is not overbought which is saying something given the rally. The PMO has been yanked upward into a Crossover BUY Signal. This move came on very strong volume, but based on the OBV, we need more to match the prior top to dispel a possible negative divergence. Stochastics are rising strongly. The industry group is not doing well which is somewhat of a drag on ELF. But, it is outperforming after today's big move. I have set the stop as deep as possible. I don't like stops more than 8% (unless we're talking about a leveraged ETF). So we have an 8% stop set around $169.86.
I noticed two long-term bull flags on the weekly chart. You can see that price is breaking out of the current flag as expected. While I don't know that it will reach the minimum upside target of the pattern (that would mean a move to $300), I do like its chances on reaching the top of the current flagpole. The weekly RSI is positive and the weekly PMO is already turning up. The StockCharts Technical Rank (SCTR) is at the top of the hot zone*.
*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.
ProShares Short Real Estate (REK)
EARNINGS: N/A
REK provides inverse exposure to a market cap-weighted index of large US real estate companies, including REITs. Click HERE for more information.
Predefined Scans Triggered: None.
REK is down -0.76% in after hours trading. I like this one as a hedge particularly if interest rates are going to rise again. This is early as the indicators are just starting to positively respond. The RSI is now in positive territory and isn't overbought. The PMO has turned up and Stochastics are rising strongly. Notice also that the fund is beginning to outperform the SPY. If the market takes a turn for the worse, this will be nice way to hedge. If you are more aggressive, you can look at leveraged DRV. The stop doesn't need to be set too deep here. I've opted to set it below support at 5.6% or $18.63.
I like the way the weekly chart is shaping up. We have a now positive RSI and the weekly PMO is surging above the signal line. I am looking for it to challenge its previous top.
Direxion Daily Small Cap Bear 3x Shares (TZA)
EARNINGS: N/A
TZA provides -3x leveraged exposure to a market-cap-weighted index of US small-cap companies. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Green.
TZA is down -0.13% in after hours trading. This is an excellent bounce off support. I don't like the SPY right now and consequently I'm very bearish on small-caps which will likely struggle if the large-caps do. The technicals are good on the chart. The RSI is now in positive territory. The PMO has turned up and is going in for a Crossover BUY Signal. Stochastics are rising vertically. The stop is set at 8% or $17.17.
The weekly PMO has already turned up and triggered a Crossover BUY Signal. The weekly RSI could use some help. This is short-term in nature and like all hedges, should be monitored closely.
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 35% long, 5% 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