I had a fair amount of stocks come through on the scans, but I wasn't all that impressed with my choices. The market is staying elevated, but the broader market is not participating to the degree I would like. This puts me on the defensive.
This works out well for our Diamonds in the Rough today. I selected two stocks from the Real Estate sector which can be considered defensive. This sector is on the rise and will likely continue to make moves higher given interest rates are beginning to retreat.
The third choice is from Utilities, a clear defensive area of the market. The stock name was dropped by a subscriber in timely fashion as the stock came up in my scans today.
The fourth selection isn't from a defensive group but it is a stock that has been steadily rising and should continue to see more upside given the clear strength emanating from the chart.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": IRT, MPW, RTX and SO.
Runner-ups: BRO, MTG and PGR.
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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.
Independence Realty Trust, Inc. (IRT)
EARNINGS: 07/24/2024 (AMC)
Independence Realty Trust, Inc. is a real estate investment trust, which acquires, owns, operates, improves and manages multifamily apartment communities across non-gateway U.S. markets. It aims to provide stockholders risk-adjusted returns through diligent portfolio management, operational performance and consistent return of capital through distributions and capital appreciation. The company was founded on March 26, 2009 and is headquartered in Philadelphia, PA.
Predefined Scans Triggered: P&F Double Top Breakout.
IRT is up +0.06% in after hours trading. It has been four strong rally days so you may see this one pause or pullback a bit before it continues higher. This would offer a good entry. The PMO is flat above the zero line so we have pure strength holding up this rising trend. The RSI is positive and far from overbought. Volume is pouring in based on the big move by the OBV. Stochastics are rising strongly and relative strength studies are bullish. The stop is set between the 50-day EMA and 200-day EMA at 6.7% or $15.88.
IRT has a very bullish weekly chart that suggests we will see upside follow through and a likely breakout. The weekly RSI is positive and the weekly PMO is rising on a Crossover BUY Signal. The StockCharts Technical Rank (SCTR) is in the hot zone*. If it can get to the next level of overhead resistance, it would be a 25%+ 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.
Medical Properties Trust Inc. (MPW)
EARNINGS: 08/06/2024 (BMO)
Medical Properties Trust, Inc. is a self-advised real estate investment trust. It engages in the investment, acquisition, and development of net-leased healthcare facilities. Its property portfolio includes rehabilitation hospitals, long-term acute care hospitals, ambulatory surgery centers, hospitals for women and children, regional and community hospitals, medical office buildings, and other single-discipline facilities. The company was founded by Edward K. Aldag Jr., R. Steven Hamner, Emmett E. McLean, and William Gilliard McKenzie in 2003 and is headquartered in Birmingham, AL.
Predefined Scans Triggered: Hollow Red Candles and P&F High Pole.
MPW is up +0.18% in after hours trading. This one did well after earnings, but pulled back sharply. It is now ready to go back up toward the prior high. Today saw a bullish hollow red candlestick. Price is holding above key moving averages. The RSI is positive and not overbought. The PMO is relatively flat above the zero line and that confirms the rising trend out of the January low. We also see a PMO Crossover BUY Signal. Stochastics are rising out of negative territory. This is low priced so position size wisely. I like the rising relative strength lines for MPW. The group is just beginning to outperform. The stop is set below the 200-day EMA at 7.6% or $5.10.
This is a nice trend reversal. The weekly RSI is positive and not overbought. The weekly PMO just rose above the zero line on a Crossover BUY Signal. The SCTR is in the hot zone. If it can get to the prior high, it would be an over 21% gain.
Raytheon Technologies Corp. (RTX)
EARNINGS: 07/23/2024 (BMO)
RTX Corp. is an aerospace and defense company, which engages in the provision of aerospace and defense systems and services for commercial, military, and government customers. It operates through the following segments: Collins Aerospace Systems (Collins), Pratt and Whitney, Raytheon Intelligence and Space (RIS), and Raytheon Missiles and Defense (RMD). The Collins segment manufactures and sells aero structures, avionics, interiors, mechanical systems, mission systems, and power controls. The Pratt and Whitney segment includes the design and manufacture of aircraft engines and auxiliary power systems for commercial, military, and business aircraft. The RIS segment is involved in the development of sensors, training, and cyber and software solutions. The RMD segment offers end-to-end solutions to detect, track, and engage threats. The company was founded in 1922 and is headquartered in Arlington, VA.
Predefined Scans Triggered: P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
RTX is down -0.04% in after hours trading. This is a beautiful steady rising trend. It does have periods of consolidation, but look at the PMO staying above the zero line the whole time. The RSI is getting overbought, but overbought conditions aren't necessarily a problem for RTX based on history. There is a new PMO Crossover BUY Signal. Stochastics are above 80 and relative strength has been rising for months. It also has a nice yield. The stop is set below the 50-day EMA at 6.6% or $100.76.
RTX is very overbought on the weekly chart based on the weekly RSI, but as with the daily chart, this condition is likely to persist. The weekly PMO is incredibly strong and the SCTR is in the hot zone. Consider a 17% upside target to about $126.23.
Southern Co. (SO)
EARNINGS: 08/08/2024 (BMO)
The Southern Co is a holding company, which engages in the generation and sale of electricity. It operates through the following segments: Traditional Electric Operating Companies, Southern Power, and Southern Company Gas. The Traditional Electric Operating Companies segment refers to vertically integrated utilities that own generation, transmission and distribution facilities, and supplies electric services in the states of Alabama, Georgia, Florida, and Mississippi. The Southern Power segment constructs, acquires, owns, and manages generation assets such as renewable energy projects and sells electricity in the wholesale market. The Southern Company Gas segment distributes natural gas through natural gas distribution facilities in the states of Illinois, Georgia, Virginia, New Jersey, Florida, Tennessee, and Maryland. The company was founded on November 9, 1945, and is headquartered in Atlanta, GA.
Predefined Scans Triggered: New 52-week Highs.
SO is down -0.10% in after hours trading. Utilities have been on fire and SO is no exception. I like the large bull flag formation on the chart that has been confirmed with a breakout. If the formation is correct, we have lots more upside available here. The RSI is a problem but it has managed to stay overbought for some time on the last rally. The PMO has turned back up into a Crossover BUY Signal well above the zero line. The OBV saw a new high which confirms this breakout move. Stochastics are above 80 and rising. Relative strength is excellent for the group and SO is clearly beating out the SPY relatively. The stop is set below the 50-day EMA on support at 7.8% or $74.42.
The weekly RSI is overbought, but not as overbought as it could get. The weekly PMO looks great as it continues to rise strongly. The SCTR also happens to be in the hot zone. It is overbought, but I see more upside potential. Consider a 17% upside target to about $94.44.
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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 30% 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.
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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.
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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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