With the Fed surprising most with a 50bps rate cut today, I decided to try and find a few ETFs that might benefit from this new condition. Plenty of areas of the market could do well with lower rates, but in particularly small- and mid-caps should see outperformance against larger-cap indexes. Banks will often be beneficiaries when rates are lowered and that was seen with a rise in many banking stocks today.
I've opted to include a Mid-Cap ETF (JHMM) and the Regional Bank ETF (KRE). The third choice was the Latin America 40 ETF (ILF) which I selected primarily based on the chart pattern.
You'll find some other choices in runner-ups, I am somewhat hesitant to go with leveraged positions in general based on the tepid finish to the market today despite the rate cut.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": ILF, JHMM and KRE.
Runner-ups: KIE, EZA, KBE, VTWO and AIRR.
Diamond Mine Trading Room:
RECORDING & DOWNLOAD LINK (9/13/2024):
Topic: DecisionPoint Diamond Mine (9/13/2024) LIVE Trading Room
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Passcode: September#13
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When: September 20, 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 9/16. 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 Latin America 40 ETF (ILF)
EARNINGS: N/A
ILF tracks a market-cap-weighted index of 40 of the largest Latin American firms. Click HERE for more information.
Predefined Scans Triggered: None.
ILF is up +0.39% in after hours trading. The large reverse head and shoulders sold me on this chart. I also like that I don't have to have a very deep stop. The RSI is positive and not at all overbought. There is a new PMO Crossover BUY Signal that occurred above the zero line. Stochastics are now above 80 and we do see some outperformance against the SPY. The stop is set thinly at 5.6% or $24.59.
The weekly chart is showing some improvement. The reverse head and shoulders is very visible. The height of the pattern suggests we'll see a breakout above this year's highs. There is a weekly PMO Crossover BUY Signal nearing. The StockCharts Technical Rank (SCTR) is unfortunately in the basement well outside the hot zone* so there is a weak outlook in the intermediate term for now so keep this in the short term time horizon. Consider a 17% upside target to about $30.48.
*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.
John Hancock Multifactor Mid Cap ETF (JHMM)
EARNINGS: None
JHMM tracks an index of US firms ranked 200-950 by size, weighted by multiple factors relative to their sector peers. Click HERE for more information.
Predefined Scans Triggered: New 52-week Highs.
JHMM is up +0.14% in after hours trading. I liked that we had a breakout on this one today. It did end up finishing lower slightly, but the intraday high looks very bullish. I would say that there is a possibility that we'll see this one move lower near-term given the bearish shooting star candlestick but I'll tell you there were plenty of these candlesticks today so we'll see if they portend lower prices. The RSI is not overbought and the PMO is on a new Crossover BUY Signal. Stochastics are holding above 80 and we can outperformance of late against the SPY. We don't need a deep stop on this one either. I've set it at 5.6% or $55.56.
The weekly chart is shaping up. Price broke out above the 2021 high and has been making its way higher since. The weekly RSI is not overbought and it is positive. The weekly PMO has just triggered a Crossover BUY Signal and the SCTR is almost in the hot zone. Consider a 17% upside target to about $68.87.
SPDR S&P Regional Banking ETF (KRE)
EARNINGS: N/A
KRE tracks an equal-weighted index of US regional banking stocks. Click HERE for more information.
Predefined Scans Triggered: Stocks in a New Uptrend (Aroon), P&F Double Top Breakout, P&F Bullish Triangle and Stocks in a New Uptrend (ADX).
KRE is unchanged in after hours trading. Price has formed a bullish "V" bottom. The pattern has matured and has reached the top of the V on the left side, but the pattern implies more upside from here. The group is doing very well as far as participation is concerned. %Stocks > 20/50/200EMAs are in the 90th percentile and the Silver Cross Index is about as good as you can get and has been. We should get some upside follow through. The RSI is not overbought and the PMO is rising toward a Crossover BUY Signal. Stochastics are moving higher toward 80 and relative strength has picked up. We should see more upside here, but in case we don't, I've set the stop below support at 7.8% or $52.79.
Price broke out of the previous trading range and has held above support. The weekly RSI is positive and not overbought. The weekly PMO is on the rise with a Crossover BUY Signal above the zero line. We can also see that the SCTR is in the hot zone. I think we could see highs near the 2022 high.
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 30% long, 0% short. Want to wait and see what the open brings tomorrow. If price looks strong enough I'll add a few positions from yesterday or today's list.
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