With the recent rally, scans have begun to really produce (as our Scan Alert System subscribers know!). I was extra picky so I do hope I found the "Diamonds in the Rough" among them.
The market has made a remarkable turnaround and I think it is time to pivot and go with this flow. There are indications on some of our indicators that this could be a good bottom with more rally to follow. Our bearish stance seems to be unwarranted at this time. Still, I would make sure to set stops if you expand your exposure.
I did see Semiconductors hit the scans today including NVDA. I think this could be a good area to take advantage of, but I opted not to include one. I think you should be okay with most that are out there, but again, keep those stops in play in case we have to pivot once again. These stocks will be the bellwether.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": AMCR, FN, FSLR and PSTG.
Runner-ups: DOC, ANET, BMY and SHC.
Diamond Mine 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.
Amcor plc (AMCR)
EARNINGS: 2024-08-15 (AMC)
Amcor Plc operates as a holding company, which engages in the consumer packaging business. It operates through the Flexibles and Rigid Packaging segments. The Flexibles segment develops and supplies flexible packaging globally. The Rigid Plastics segment manufactures rigid plastic containers and related products. The company was founded 1926 and is headquartered in Warmley, the United Kingdom.
Predefined Scans Triggered: Elder Bar Turned Green, New 52-week Highs, Moved Above Upper Price Channel and P&F Low Pole.
AMCR is down -0.09% in after hours trading. This one can be listed under "winners that keep on winning". It is continuing to make new 52-week highs and today saw another breakout. It's hard to see but the PMO surged above the signal line (bottomed above the signal line). This occurred well above the zero line so there is pure strength. The RSI is not overbought and Stochastics are rising above 80. Relative strength in the intermediate term has been very good. I set the stop below the 50-day EMA and below the previous lows at 7% or $9.95.
I like the way the weekly chart is set up. Price is in a rounded bottom and rising toward the top of the prior trading range. The weekly RSI is positive and not yet overbought. The weekly PMO is rising after a prior surge above the signal line. The StockCharts Technical Rank (SCTR) is well within the hot zone* above 70. Upside potential is more than half of our stop level at over 16%.
*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.
Fabrinet (FN)
EARNINGS: 2024-08-19 (AMC)
Fabrinet engages in the provision of optical packaging and electronic manufacturing services to original equipment manufacturers. The firm's engineering services include process design, failure analysis, reliability testing, tooling design, and real-time traceability system. Its manufacturing operations offer sensors, subsystems, customized optics, and optical modules and components. The company was founded by David Thomas Mitchell on August 12, 1999 and is headquartered in George Town, Cayman Islands.
Predefined Scans Triggered: Elder Bar Turned Green, Entered Ichimoku Cloud, P&F Double Top Breakout and Bullish MACD Crossovers.
FN is down -1.62% in after hours trading so it is shaving off some of today's rally. The rally took price back above the 20-day EMA. It has been on a steep decline, but this rally has taken price out of a steep declining trend channel. The RSI is still negative, but it is rising and is just about in positive territory above net neutral (50). The PMO has just started to rise. Stochastics are now in positive territory and like the bit of outperformance we are seeing from both the group and the stock. The stop is set beneath the 200-day EMA at 7.6% or $201.20.
After the prior decline, the weekly PMO looks pretty terrible, but the weekly RSI is recovering. The SCTR needs some help too so consider this a short-term horizon trade until we see a better configuration on the weekly chart. I like upside potential.
First Solar Inc. (FSLR)
EARNINGS: 2024-10-29 (AMC)
First Solar, Inc. is a solar technology company, which engages in the provision of solar modules. It is involved in the design, manufacture, and sale of cadmium tellurid (CdTe) solar modules, which convert sunlight into electricity. The company was founded by Michael J. Ahearn in 1999 and is headquartered in Tempe, AZ.
Predefined Scans Triggered: Moved Above Upper Bollinger Band, Parabolic SAR Buy Signals, New CCI Buy Signals and P&F Double Top Breakout.
FSLR is down -0.37% in after hours trading. I really liked the breakout from the declining trend channel on this one. It does make me a little nervous as this is a very aggressive area of the market so be prepared for possible volatility. The RSI has just entered positive territory and the PMO is on a brand new Crossover BUY Signal. I also noticed a positive OBV divergence that suggests we will see followthrough on this rally. Stochastics are rising and relative strength looks pretty good. The stop is arbitrarily set at 7.7% or $212.53.
The weekly PMO doesn't look good so keep this short-term in nature. The weekly RSI does look good and is not overbought. The SCTR is well within the hot zone so it should see a breakout above the 2023 top. Upside potential is excellent, but know that it can lose a lot in a day so be prepared for volatility. Not for the faint of heart.
Pure Storage, Inc. (PSTG)
EARNINGS: 2024-08-28 (AMC)
Pure Storage, Inc. engages in the business of delivering innovative and disruptive data storage, products, and services that enable customers to maximize the value of data. The firm is also involved in the provision of data storage and management with a mission to redefine the storage experience by simplifying how people consume and interact with data. The company was founded by John M. Hayes and John Colgrove in October 2009 and is headquartered in Santa Clara, CA.
Predefined Scans Triggered: P&F Low Pole.
PSTG is up +0.67% in after hours trading. It has been on a fine rally and today managed to overcome the 50-day EMA. This also coincides with strong resistance at the March top. The RSI just hit positive territory and hence isn't overbought. The PMO is nearing a Crossover BUY Signal. Stochastics are rising toward 80. Relative strength looks very good for the group and we see PSTG starting to outperform both the group and the SPY. The stop is set beneath the late July lows at 7.8% or $54.94.
Not surprisingly the weekly PMO is in decline after the price decline out of all-time highs. However, the weekly RSI is positive and not overbought and the SCTR is in the hot zone. Still, I would keep the time horizon to the short term based on the weekly PMO. Upside potential is almost 19%.
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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 20% long, 0% short. All four of today's selections are on my radar.
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.
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Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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