I had a few themes come through on ETF Day and I'll be taking advantage of them. The choices were somewhat limited but two themes were ever present with plenty of ETFs to cover them. The final choice is a sector that is likely to shine as we see mega-caps backing off highs.
Speaking of mega-caps backing off, the inverse 3x Semiconductor Bear ETF (SOXS) came up and that could take advantage of new found weakness in Technology, particularly Semis. I opted not to present it, but I wanted to be sure to tell you about it in case you have an appetite for it.
The two main themes were Bonds and Bitcoin. There were plenty of funds that came up in this area. I opted to go with TMF which is a 3x fund for 20-year Bonds. I see interest rates continuing to fall from here and that will offer some upside opportunity for Bond funds. They are slow movers so I decided going for a leveraged or juiced ETF was a good thing.
Bitcoin has numerous ETFs covering it now. I opted to go with Fidelity's version (FBTC), but feel free to explore the other ETFs if you aren't partial to Fidelity.
Consumer Staples (XLP) saw a strong breakout rally to new all-time highs. I like this sector moving forward on this breakout and possible weakness that may seep in with the failure in mega-caps.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": FBTC, TMF and XLP.
Runner-ups: SOXS and EWL.
Diamond Mine Trading Room:
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Topic: DecisionPoint Diamond Mine LIVE Trading Room
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Below is the latest free DecisionPoint Trading Room recording from 7/15. You'll find these recordings posted on Mondays to our DP YouTube Channel. Be sure and subscribe HERE.
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.
Fidelity Wise Origin Bitcoin Fund (FBTC)
EARNINGS: N/A
This product is for investors with a high risk tolerance. It invests in a single asset, bitcoin, which is highly volatile and can become illiquid at any time. Click HERE for more information.
Predefined Scans Triggered: P&F Bearish Signal Reversal and P&F Double Top Breakout.
FBTC is down -0.69% in after hours trading. Bitcoin looks ready to make another run at all-time highs. The breakout from the declining trend on a gap up was very bullish. The RSI is in positive territory and is not overbought. The PMO is on a new Crossover BUY Signal. Stochastics are rising well above 80. Bitcoin is currently outperforming the market. I wanted to set the stop below gap support, but it came out too deep so I got as close as I could at 7.8% or $52.12.
I do not like the large bearish double top on the weekly chart so for now consider this a short-term investment that should take price to all-time highs. Maybe it will set up a triple top. It did work out the straight up rally with this consolidation so it could very well be working its way back to all-time highs. The weekly RSI is positive and the StockCharts Technical Rank (SCTR) is at the top of the hot zone* suggesting it is really outperforming all ETFs. Upside potential is decent if it only tests all-time highs.
*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.
Direxion Daily 20+ Year Treasury Bull 3x Shares (TMF)
EARNINGS: N/A
TMF provides 3x daily exposure to a market-value-weighted index of US Treasury Bonds with over 20 years to maturity. Click HERE for more information.
Predefined Scans Triggered: None.
TMF is down -0.32% in after hours trading. As noted in the opening I am a fan of bond funds right now given my bearish outlook on yields. We don't have a breakout yet, but I'm expecting one. The RSI is positive and not overbought. The PMO is on a Crossover BUY Signal and notice the rising OBV. Stochastics are healthy above 80 and relative strength is rising. This is a leveraged ETF so we have to set a deep stop. I opted for 9.1% or $47.60.
Upside potential is great here and the indicators are shaping up with the weekly RSI moving into positive territory and the weekly PMO rising on a Crossover BUY Signal. It's leveraged remember so position size wisely.
Consumer Staples Select Sector SPDR Fund (XLP)
EARNINGS: N/A
XLP tracks a market-cap-weighted index of consumer-staples stocks drawn from the S&P 500. Click HERE for more information.
Predefined Scans Triggered: New CCI Buy Signals, Moved Above Upper Keltner Channel, New 52-week Highs, Moved Above Upper Bollinger Band, Stocks in a New Uptrend (Aroon), Moved Above Upper Price Channel and P&F Double Top Breakout.
XLP is up +0.09% in after hours trading. I have under the hood readings here. Notice the strong breakout from the bullish ascending triangle. The RSI is positive and not yet overbought. The PMO just triggered a Crossover BUY Signal. The Silver Cross Index had a Bullish Shift across the signal line giving XLP a new Bullish Bias in the intermediate term. Participation is healthy and not overbought yet. Stochastics just moved above 80 and relative strength jumped today. I've set the stop below one of our lines of support at 7.2% or $73.07.
The weekly chart looks excellent on the breakout. The weekly RSI is not overbought yet and the weekly PMO has surged above the signal line. I'd like a stronger SCTR, but it is rising. Consider a 17% upside target around $92.13.
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)
For more links, go to DecisionPoint.com