I don't have a lot to impart to you today so I'll keep this rather short. I wasn't really impressed by the scan results today. I had to run a scan that I usually don't but that opens up new possibilities when my primary scans disappoint. Members of the Scan Alert System will know what I'm talking about when they review today's selections.
I did find a handful of symbols of course that fit the Diamond in the Rough profile so we'll see how they fair this week. The issues I had when selecting were with relative strength and in a few cases with overbought conditions.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": CRDO, EHC, HWM and KTOS.
Runner-ups: UHT, ABG, ARM and VIAV.
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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.
Credo Technology Group Holding Ltd. (CRDO)
EARNINGS: 2024-11-27 (AMC)
Credo Technology Group Holding Ltd. engages in the development of connectivity solutions and products for the data infrastructure market. Its products include integrated circuits, active electrical cables, and SerDes chiplets. The company was founded by Chi Fung Cheng and Yat Tung Lam in September 2014 and is headquartered in George Town, Cayman Islands.
Predefined Scans Triggered: Filled Black Candles.
CRDO is unchanged in after hours trading. Here we have a nice rally off support at the 200-day EMA and horizontal support at March tops. There is also a new Silver Cross of the 20/50-day EMAs which gives us an IT Trend Model BUY Signal. The 5-day EMA has also crossed above the 20-day EMA for a ST Trend Model BUY Signal. It does have overhead resistance to deal with at the top of the gap, but it is recuperating quite well from its earnings drop. The RSI is far from overbought and there is a PMO Crossover BUY Signal approaching. Stochastics are moving up. I very much like relative strength studies with all three relative strength lines rising. The stop is arbitrarily set at 7.8% or $27.54.
We still see a nice rising trend in the long term out of the 2023 low and price has held above support at the early 2024 high. The weekly PMO doesn't look too good as it is nearing a Crossover SELL Signal, but at the same time it has decelerated its decline. The StockCharts Technical Rank (SCTR) is in the hot zone*.
*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.
Encompass Health Corp. (EHC)
EARNINGS: 2024-10-24 (AMC)
Encompass Health Corp. engages in the provision of post-acute healthcare services. It operates through the Inpatient Rehabilitation and Home Health and Hospice segments. The Inpatient Rehabilitation segment operates inpatient rehabilitation hospitals that provide rehabilitative treatment and care to patients who are recovering from stroke and other neurological disorders, cardiac and pulmonary conditions, brain and spinal cord injuries, complex orthopedic conditions and amputations. The Home Health and Hospice segment provides Medicare-certified home nursing, specialized home care and in-home services. The company was founded by Richard M. Scrushy on February 22, 1984 and is headquartered in Birmingham, AL.
Predefined Scans Triggered: Improving Chaikin Money Flow, New CCI Buy Signals, New 52-week Highs, Moved Above Upper Bollinger Band, Moved Above Upper Price Channel, P&F Double Top Breakout, P&F Triple Top Breakout and P&F Quadruple Top Breakout.
EHC is up +0.06% in after hours trading. Today saw a strong breakout above sturdy resistance. It came on high volume. EMAs are configured positively with fastest at the top moving to slowest at the bottom. The RSI is not overbought and we have a PMO Crossover BUY Signal that triggered today. Stochastics are also rising again in positive territory. One problem would be that the industry group it is in is not performing well at all against the SPY. I'll take it simply because EHC is a great performer against the SPY on its own. The stop is set at support at 7.7% or $87.86.
We have a nice breakout to new all-time highs. The weekly RSI is positive and not overbought and the weekly PMO is not only on a Crossover BUY Signal, it is also flat above the signal line implying pure strength. I also like that the SCTR is in the hot zone. Consider a 17% upside target to $111.38.
Howmet Aerospace Inc. (HWM)
EARNINGS: 2024-10-31 (BMO)
Howmet Aerospace, Inc. engages in the development and manufacturing of lightweight metal products. It operates through the following segments: Engine Products, Fastening Systems, Engineered Structures, and Forged Wheels. The Engine Products segment produces investment castings, including airfoils, and seamless rolled rings primarily for aircraft engines (aerospace commercial and defense) and industrial gas turbines. The Fastening Systems segment is involved in producing aerospace fastening systems and commercial transportation fasteners. The Engineered Structures segment includes titanium ingots and mill products for aerospace and defense applications and is vertically integrated to produce titanium forgings, extrusions forming and machining services for airframe, wing, aero-engine, and landing gear components. The Forged Wheels segment provides forged aluminum wheels and related products for heavy-duty trucks, trailers, and buses globally. The company was founded in 1888 and is headquartered in Pittsburgh, PA.
Predefined Scans Triggered: Moved Above Upper Bollinger Band, P&F Ascending Triple Top Breakout, P&F Double Top Breakout and New 52-week Highs.
HWM is up +0.18% in after hours trading. We have a nice breakout above near-term resistance. EMAs are configured positively. The RSI is not yet overbought, but even if it does get overbought, based on history we shouldn't worry too much as it has easily held overbought conditions for days and days. The PMO is nearing a Crossover BUY Signal well above the zero line. Stochastics are now above 80. Relative is good with all relative strength lines in rising trends. I've set the stop at the 50-day EMA at 7.9% or $91.50.
The main problem with this weekly chart is that price is overbought again based on the weekly RSI, but as with the daily chart, we can see that HWM can hold overbought conditions for some time before seeing a pullback. The weekly PMO has surged (bottomed) above the signal line. The SCTR is in the hot zone. Consider a 17% upside target to $116.24.
Kratos Defense & Security Solutions, Inc. (KTOS)
EARNINGS: 2024-10-31 (AMC)
Kratos Defense & Security Solutions, Inc. engages in the provision of mission critical products, services and solutions for United States national security priorities. It operates through the Kratos Government Solutions (KGS) and Unmanned Systems (US) segments. The KGS segment consists of an aggregation of KGS operating segments, including microwave electronic products, space, satellite and cyber, training solutions. The US segment refers to the unmanned aerial, unmanned ground, unmanned seaborne and related command, control and communications system businesses. The company was founded on December 19, 1994, and is headquartered in Round Rock, TX.
Predefined Scans Triggered: P&F Triple Top Breakout, Elder Bar Turned Blue, P&F Double Top Breakout.
KTOS is up +0.09% in after hours trading. We saw a nice breakout with a mechanical pullback today. Usually that is a good setup for upside follow through on the breakout. With global tensions high, I think this is a good industry group to pick from. The RSI is not overbought and the PMO is rising on a Crossover BUY Signal that occurred above the zero line. Stochastics are rising toward 80 despite today's decline. Relative strength is okay for the group right now, could be better. However, KTOS is outperforming the group and the SPY. The stop is set beneath the 50-day EMA at 7.3% or $21.52.
Plenty of upside potential on this one. Not sure it will recapture the 2021 high, but this rally and breakout do suggest it will try. The weekly PMO looks very bullish as it is flat above the zero line and on a Crossover BUY Signal. I also like that the SCTR is in the hot zone.
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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 60% 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.
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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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