Thank you to those who sent in requests this week. There weren't many and I would say this is a function of poor breadth and internals. The indexes may be advancing onward, but under the hood, we don't have as much of the broad market participating in the rally.
Today Broadcom (AVGO) and NVIDIA (NVDA) carried both the SPY and Nasdaq to new all-time highs while the other indexes were lower. It tells me that we should continue to look for larger-cap stocks until the broad market decides to catch up.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": DDOG, GEL and WDC.
Other requests: ALTR, AAON, SKT and FAST.
RECORDING & DOWNLOAD LINK (6/7/2024):
Topic: DecisionPoint Diamond Mine (6/7/2024) LIVE Trading Room
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Topic: DecisionPoint Diamond Mine (6/14/2024) 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.
Datadog Inc. (DDOG)
EARNINGS: 08/06/2024 (BMO)
Datadog, Inc. engages in the development of a monitoring and analytics platform for developers, information technology operations teams and business users. Its platform integrates and automates infrastructure monitoring, application performance monitoring and log management to provide real-time observability of its customers' entire technology stack. The company was founded by Olivier Pomel and Alexis Le-Quoc on June 4, 2010, and is headquartered in New York, NY.
Predefined Scans Triggered: Filled Black Candles and Ichimoku Cloud Turned Red.
DDOG is down -0.28% in after hours trading. I'm not thrilled with the large rounded top on the chart and price hasn't quite broken its near-term declining trend, but this rally does have merit given the way the indicators are beginning to shape up. The RSI is positive and not at all overbought. There is a new PMO Crossover BUY Signal and Stochastics are rising strongly toward 80. I like how relative strength lines are all rising. The stop would be too deep to set below support so I made it as deep as I was comfortable at 7.8% or $110.21.
You can see the rounded top more clearly on the weekly chart. Good news is that price is back above strong resistance. The weekly RSI has moved into positive territory, but the weekly PMO is still in decline. While the StockCharts Technical Rank (SCTR) is not in the hot zone*, it is on its way there swiftly. If it can make it to the next line of resistance it would be a 17% gain.
*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.
Genesis Energy L P (GEL)
EARNINGS: 08/01/2024 (BMO)
Genesis Energy LP engages in the provision of midstream services and produces natural soda ash. It operates through the following segments: Offshore Pipeline Transportation, Sodium Minerals and Sulfur Services, Onshore Facilities and Transportation, and Marine Transportation. The Offshore Pipeline Transportation segment owns interests in crude oil and natural gas pipeline transportation and handling operations through its offshore pipeline transportation segment. The Sodium Minerals and Sulfur Services segment comprises Alkali and sulfur removal business. The Onshore Facilities and Transportation segment owns and leases suite of onshore crude oil and refined products infrastructure, including pipelines, trucks, terminals, railcars, and rail loading. The Marine Transportation segment provides transportation services by tank barge primarily for refined petroleum products, including heavy fuel oil and asphalt, as well as crude oil. The company was founded in 1996 and is headquartered in Houston, TX.
Predefined Scans Triggered: Stocks in a New Uptrend (ADX) and P&F Double Top Breakout.
GEL is up +1.69% in after hours trading. I really liked the breakout and the mechanical pullback toward the breakout point. It is above new support and should bounce here based on the indicators. It had a very bearish chart earlier with a double top, but the pattern was busted on a breakout which is especially bullish. I also note that there was a positive OBV divergence leading into this rally. The RSI is positive and not overbought. The PMO is rising on a Crossover BUY Signal above the zero line and Stochastics are above 80. Relative strength isn't good for the group right now but with the Crude Oil trade shaping up again, that should change soon. Regardless GEL is outperforming the market. The stop is set near the 50-day EMA at 7.6% or $12.58.
It has a very nice weekly chart as price has broken free from a long-term trading channel. The weekly RSI is positive and not yet overbought and the weekly PMO is on a Crossover BUY Signal. The SCTR also happens to be in the hot zone right now. It would be about a 19% gain to the next level of overhead resistance.
Western Digital Corp. (WDC)
EARNINGS: 07/31/2024 (AMC)
Western Digital Corp. engages in the development, manufacture, marketing, and sale of data storage devices and solutions. It operates through the Flash and Hard Disk Drive segments. The Flash segment represents flash-based data storage devices. The Hard Disk Drive segment provides hard disk storage solutions. The company was founded by Alvin B. Phillips in 1970 and is headquartered in San Jose, CA.
Predefined Scans Triggered: New 52-week Highs, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
WDC is down -0.11% in after hours trading. We have a nice breakout to new 52-week highs. We saw a flat top and rising bottoms leading into this which is a bullish ascending triangle so the pattern was prescient. The RSI is positive and not overbought. The PMO has recently triggered a Crossover BUY Signal above the zero line. It is also flat well above the zero line and that is a sign of pure strength. Stochastics are above 80. It may not be outperforming the group, but it is outperforming the SPY which is primarily what matters. The group is on fire right now likely due to Apple's recent rally. Hard for any stock to compete with that. The stop is set near the 50-day EMA at 7.9% or $73.29.
Note that WDC has broken above strong overhead resistance on the weekly chart. The weekly RSI is overbought, but given this strong bull market rally, that will likely persist. The weekly PMO is surging above the signal line. The SCTR is in the hot zone, at the top of it actually. Consider a 17% upside target to about $93.11.
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 "Under the Hood" 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 45% 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)
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