What a strange market day it was with it starting off very bearish and finishing on a high note as Technology jetted higher. I'll be reviewing my thoughts on this in today's DP Alert. Is this a true bottom or a bull trap?
I decided to pick one ETF with its toe in the Technology sector, Telecommunications ETF (IYZ). This will take advantage of any strength that comes in, should it come in within the market as a whole.
I have a defensive play with the leveraged 20+ Year Bond Bull 3x ETF (TMF). Interest rates are continuing to slide lower and that should continue to push this ETF higher.
The final pick is a reversal candidate, Uranium (URA). It has been in its own bear market but things are beginning to look up here. We had a question in the DP Trading Room about investing in nuclear energy based on the need for high computing power on AI. I don't know about this as a reason. I just know the chart is really looking up after a strong rally today.
Natural Gas (UNG) is lining up for another run higher, but I wasn't ready to present it as it has a tendency to fail when it finally looks good. It is worth a review though.
I must say, I'd like to take back yesterday's short on CRWD given the tech turnaround. So be careful here if you did go in on a short position.
Tomorrow is Reader Request Day so get your symbols in to me soonest!
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": IYZ, TMF and URA.
Runner-ups: UNG, DBA, XLY and LIT.
Diamond Mine Trading Room:
RECORDING & DOWNLOAD LINK (9/6/2024):
Topic: DecisionPoint Diamond Mine (9/6/2024) LIVE Trading Room
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Passcode: September#6
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When: September 13, 2024 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine LIVE Trading Room
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Below is the latest free DecisionPoint Trading Room recording from 9/9. 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.
iShares U.S. Telecommunications ETF (IYZ)
EARNINGS: N/A
IYZ tracks a market-cap-weighted index of large-cap US companies involved in the telecommunications industry. Click HERE for more information.
Predefined Scans Triggered: None.
IYZ is down -0.08% in after hours trading. Here we have a bull flag formation that has been confirmed by today's breakout. It suggests we could see a move to about $25.75. The RSI is positive and not overbought. The PMO has just turned up and is about to whipsaw back into a Crossover BUY Signal. It is well above the zero line signaling pure strength. Stochastics have turned up and are in positive territory. This ETF has been outperforming the SPY since July. I've set a deeper stop than is really necessary. I opted to put it below the 200-day EMA at 7.5% or $21.89.
It has been in a sideways trading range and it is at the top of the range so we could see some consolidation or a pullback before a breakout. The indicators are set up very well and do suggest we'll see a breakout here. The weekly RSI is positive and the weekly PMO is rising above the zero line on a Crossover BUY Signal. The StockCharts Technical Rank (SCTR) is at the top of the hot zone*. Consider a 17% upside target to $27.69.
*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 -0.19% in after hours trading. I like Bond funds right now given the decline in interest rates. I'm betting on more upside for Bonds. This is ETF is leveraged 3x so be aware. Bond funds tend to be slow movers so this could offer better exposure to that area of the market. The RSI is positive and not overbought. The PMO is rising on a Crossover BUY Signal that occurred well above the zero line. Stochastics have turned back up and reside above 80. Relative strength has been quite good for this area of the market. I've set the stop as close to support as possible at 7.8% or $58.22.
Price has broken out of a long-term declining trend channel and has formed a bullish reverse head and shoulders. Price has peeked above resistance at the 2022 low. The weekly RSI is positive and not overbought. The weekly PMO is rising above the zero line on a Crossover BUY Signal. I'm looking for a move toward the 2023 highs.
Global X Uranium ETF (URA)
EARNINGS: None
URA tracks a market-cap-weighted index of companies involved in uranium mining and the production of nuclear components. Click HERE for more information.
Predefined Scans Triggered: None.
URA is up +0.55% in after hours trading. It was a very strong rally following two prior days of higher prices. This has set up a bullish double bottom pattern. This is a reversal candidate as price has been under the 200-day EMA for some time. The RSI is nearing positive territory. The PMO is on a brand new Crossover BUY Signal. Stochastics are rising again, but are in negative territory still. We are seeing a little outperformance over the past few days. The stop is set as close to support as I could get it at 8% or $23.31.
This an excellent area to see a reversal as it is coming off strong support. The rest of the chart hasn't woken up yet, but as noted earlier this is a reversal candidate so don't expect the weekly chart to be that healthy. The weekly RSI is still in negative territory and the weekly PMO is in decline. The SCTR is terrible. If this reversal works, I could see a breakout to new 52-week highs.
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)
For more links, go to DecisionPoint.com