The market saw a nice snapback rally today, but the question is will it last. I don't think this is the beginning of a new bull market move. I see the market as still vulnerable. Consequently I am keeping my own exposure low and have made sure I have stops on my positions.
Since I do think we are entering a very unfavorable period for the market, I decided to add a shorting candidate. As part of the new Scan Alert System, I am including the results from the short Diamond Dog Scan. Admittedly I don't like most of them for shorts, but I did find a few of interest.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": CERT (Short), MMSI, TNDM and WELL.
Runner-ups: TNDM, MKTX, INN, BC (Short) and EVTC (Short).
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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.
Certara Inc. (CERT) ** SHORT **
EARNINGS: 2024-08-06 (AMC) ** Reported Today **
Certara, Inc. engages in the provision of software and technology-enabled services for drug developers. It offers cell and gene therapy, clinical pharmacology, complex biologics, decision analytics and modeling, drug development and regulatory strategy, and model-based analysis services. The company was founded on June 27, 2017, and is headquartered in Radnor, PA.
Predefined Scans Triggered: None.
CERT is down -4.84% in after hours trading on earnings after the bell. This was already lined up to do poorly. It has been is a sharp declining trend and lost important support at the April/May lows. The RSI is negative and the PMO is about to trigger a Crossover SELL Signal. Stochastics did turn up, but they are in negative territory. The industry group is doing well, but CERT is clearly struggling with relative strength. I have set the upside stop at the 200-day EMA at 8% or $16.28.
The weekly PMO is the tell here. It has topped beneath the signal line. The weekly RSI is negative and we can see that price is in a declining trend. The StockCharts Technical Rank (SCTR) is at 33% suggesting it is in the bottom third of its universe. I've marked downside potential to the all-time low.
*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.
Merit Medical Systems, Inc. (MMSI)
EARNINGS: 2024-10-31 (AMC)
Merit Medical Systems, Inc. engages in the manufacture and marketing of proprietary disposable medical devices. It operates through the Cardiovascular and Endoscopy segments. The Cardiovascular segment consists of peripheral intervention, cardiac intervention, interventional oncology and spine, and cardiovascular and critical care product groups. The Endoscopy segment integrates non-vascular stent technology with balloon dilators, inflation devices, guide wires, procedure kits, and other devices that are used by gastroenterologists, endoscopists, pulmonologists, and thoracic and general surgeons. The company was founded by Fred P. Lampropoulos, Darla Gill, Kent W. Stanger, and William Padilla in July 1987 and is headquartered in South Jordan, UT.
Predefined Scans Triggered: Moved Above Upper Bollinger Band, P&F Ascending Triple Top Breakout, P&F Bullish Catapult and P&F Double Top Breakout.
MMSI is down -0.65% in after hours trading. We have a nice breakout today coming out of a prior rounded top. This is a bullish conclusion to a bearish pattern which is especially bullish. The RSI is not overbought and the PMO has just generated a Crossover BUY Signal. Stochastics are rising strongly toward 80. Relative strength is excellent for the group and MMSI is kicking relative strength into high gear on the recent rally out of the rounded top. I've set the stop below support at 7.7% or $82.68.
Price broke up a prior bearish head and shoulders with the 2023 top as the head. The weekly RSI is a bit of problem as it is overbought. However, the PMO is rising on a Crossover BUY Signal and the SCTR is in the hot zone above 70. Consider a 17% upside target to about $104.81.
Tandem Diabetes Care, Inc. (TNDM)
EARNINGS: 2024-10-30 (AMC)
Tandem Diabetes Care, Inc. engages in the design, development, and commercialization of products for people with insulin-dependent diabetes. Its products include Tandem Mobi System and t:slim X2 Insulin Pump. The company was founded by Paul M. DiPerna on January 27, 2006, and is headquartered in San Diego, CA.
Predefined Scans Triggered: Bullish MACD Crossovers, Entered Ichimoku Cloud and P&F Double Top Breakout.
TNDM is unchanged in after hours trading. I love the large double bottom that is developing. The stock rallied out of a declining trend on earnings. The RSI just moved into positive territory and the PMO is nearing a Crossover BUY Signal. Stochastics are rising and just hit positive territory. Relative strength studies show strongly rising relative strength lines. I've set the stop as close to support as I could at 7.9% or $39.96.
The weekly chart is mixed. The weekly PMO looks pretty ominous, but it is tempered by a positive weekly RSI and a very strong SCTR. The declining trend out of the 2024 high is the culprit. I see a reversal coming off the 43-week EMA. If it can just reach the next level of resistance, it would be an almost 29% gain.
Welltower Inc. (WELL)
EARNINGS: 2024-10-28 (AMC)
Welltower, Inc. operates as a health care infrastructure company. It invests in seniors housing operators, post-acute providers and health systems to fund the real estate infrastructure. The company's operating business segments include Seniors Housing Operating, Triple-Net and Outpatient Medical. The Seniors Housing Operating segment operates properties including seniors' apartments, independent living and independent supportive living, continuing care retirement communities, and assisted living, Alzheimer's/dementia care and includes care homes with or without nursing. The Triple-Net segment properties offer services including independent living & supportive living (Canada), assisted living, continuing care retirement communities, Alzheimer's/dementia care and care homes with or without nursing (U.K.), and long-term/post-acute care. The Outpatient Medical segment invests in and operates outpatient medical buildings including physician offices, ambulatory surgery centers, diagnostic facilities, outpatient services and/or labs. The company was founded in 1970 and is headquartered in Toledo, OH.
Predefined Scans Triggered: Elder Bar Turned Green, New 52-week Highs, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
WELL is unchanged in after hours trading. Today saw a big rally to new 52-week highs. The RSI is the only real problem with the chart as it has just hit overbought territory, but given it has managed to hold those conditions previously, I'm okay with it. The PMO is accelerating above the signal line well above the zero line. The PMO surged or bottomed above the signal line. Stochastics are in positive territory and are currently rising. Relative strength is rising for the group and WELL. I set the stop below support at 7.8% or $105.99.
Overbought conditions on the RSI is also a problem on the weekly chart not just the daily chart. However, it has managed to hold these conditions for weeks. The weekly PMO is rising and has been flat above the zero line implying pure strength. The SCTR is at the top of the hot zone. Consider a 17% upside target to $134.50.
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 20% 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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