Three people sent in requests this week and I opted to present one from each of them. They aren't perfect charts, but they are really good. It is so satisfying to see readers come up with great charts. Clearly you are gleaning information from these reports.
Semiconductors (SMH) was requested on the pullback. I think it is time again for them to retreat and if you look at SMH you'll see a possible double top brewing. They are also very overbought so I would be very careful about adding to your positions in this area.
The Crude trade may be turning around on a bull flag so I included an Energy stock.
Banks are getting ready to report tomorrow, at least some of the big banks. The group itself is starting to outperform so good earnings tomorrow could boost an already interesting industry group.
Finally, I'm including the Real Estate Bull 3x ETF (DRN). You know I'm not a fan of leveraged funds, but if you view and use them in the very short term, they can be lucrative. If the growth stocks continue to see harm, this defensive area of the market is likely to do very well as it did today. It was a big move up today so we could see some pullback tomorrow.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": ARIS, DRN and HTLF.
Other requests: SMH, EWN, JWN, ARR, ERJ, FOX and GS.
RECORDING & DOWNLOAD LINK (7/5/2024):
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Topic: DecisionPoint Diamond Mine (7/12/2024) 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.
Aris Water Solutions Inc. (ARIS)
EARNINGS: 2024-07-31 (AMC)
Aris Water Solutions, Inc. engages in full-cycle water handling and recycling solutions. It gathers, transports, and, unless recycled, handles produced water generated from oil and natural gas production. It also develops and operates recycling facilities to treat, store, and recycle produced water. The company was founded by William A. Zartler in November 2015 and is headquartered in Houston, TX.
Predefined Scans Triggered: Filled Black Candlesticks.
ARIS is up +2.17% in after hours trading so today's bearish filled black candlestick will likely not result in a decline tomorrow. There is a small bull flag leading into today's rally. The RSI is not overbought and the PMO is rising on a Crossover BUY Signal. Stochastics turned back up in positive territory. Relative strength kicked in a bit for the industry group. ARIS is already outperforming both the group and more importantly the SPY. I've set the stop at the 50-day EMA at 7.7% or $14.90.
The weekly chart shows a large double bottom that fulfilled its minimum upside target on the recent high. Just because the minimum target has been met, it doesn't mean it can't move higher, they often do. The weekly RSI is positive and not overbought. The weekly PMO is on a Crossover BUY Signal and is flattening to avoid a SELL Signal. The StockCharts Technical Rank (SCTR) is at the top of the hot zone* above 70. I'm looking at an upside target that is halfway up the next trading range.
*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 Real Estate Bull 3x Shares (DRN)
EARNINGS: N/A
DRN provides 3x leveraged exposure to an index that captures large cap equities of the US real estate segment. Click HERE for more information.
Predefined Scans Triggered: Gap Ups, Moved Above Upper Keltner Channel, Stocks in a New Uptrend (Aroon), Runaway Gap Ups and P&F Double Top Breakout.
DRN is down -0.21% in after hours trading. Today saw a breakaway gap up that pulled price out of a symmetrical triangle. Those are continuation patterns so it continued the prior rally out of the April low. This is a defensive area of the market that could see more opportunity if mega-caps continue to slide. I wouldn't be surprised if it did pull back a bit on today's huge gain. Volume soared on today's move which does suggest we will see follow through. The RSI is overbought, but a pullback would fix that quickly. The PMO is accelerating higher as is the OBV. Stochastics are almost above 80 and obviously relative strength picked up today. The stop is below gap support at 7.7% or $8.89.
We can see a long-term trading range for Real Estate so I marked upside potential to the top of that range. The weekly RSI is positive and is not overbought. The weekly PMO is seeing a new Crossover BUY Signal. Real Estate may be a Sector to Watch this week.
Heartland Financial USA Inc. (HTLF)
EARNINGS: 2024-08-05 (BMO)
Heartland Financial USA, Inc. operates as a bank holding company, which provides commercial banking services. It also engages in the business of community banking. The company was founded in 1981 and is headquartered in Denver, CO.
Predefined Scans Triggered: New 52-week Highs and P&F Double Top Breakout.
HTLF is unchanged in after hours trading. Banks had a good idea and HTLF was no exception. It broke out strongly after two excellent rally days. It may need a pause as the RSI is now overbought. We'll see. The PMO suggests we will see the rally continue as we have a new Crossover BUY Signal. Stochastics also look strong above 80. The industry group is already performing well and HTLF is showing strength against both the group and the SPY. I've set the stop at the 20-day EMA around 7.5% or $44.03.
This has been a really good week for HTLF and that is the culprit that brought the weekly RSI into overbought territory. It generally doesn't stay there for long so keep this one in the short-term timeframe. The weekly PMO is accelerating higher above the signal line and zero line. The SCTR is in the hot zone. Consider a 17% upside target to about $55.69.
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 40% 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