It was a good week overall for "Diamonds in the Rough" but yesterday's Technology picks did suffer losses today as that sector pulled back. What is interesting is that despite a nearly 5% loss today, the "Dud" of the week still has promise.
The Dud was Dell Technologies (DELL) which did have a terrible day. The Darling this week was Credo Technology Group (CRDO) which was up 5.25% on the week.
I will say that all of this week's Diamonds in the Rough have growth potential. All of them still have positive RSIs and PMOs and as far as I'm concerned all of them hold promise. The one thing I would say is that we need to take our cue from the open on Monday to see if Technology is a safe place to be. If the market does succumb to weakness, this area will be hit.
I did choose Technology as this week's Sector to Watch, but as noted above we will need the market to cooperate for it to see the growth that is possible based on the technicals under the hood right now.
The Industry Group to Watch was Semiconductors (SMH) which is showing a double bottom and strong numbers under the hood. I found a few symbols from this area. Remember that AMD was already a selection so it is on the list with: AVGO, IDCC, TSM, ARM, GSIT and ONTO. Again we need the market to cooperate next week.
I also ran scans as usual at the end of the trading room and we did find some interesting symbols: EA, HBI, PZZA, NVST, KEYS and BGS.
Have a great weekend! I'll see you in Monday's trading room.
Good Luck & Good Trading,
Erin
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A few items about the spreadsheet: I've put on the spreadsheet whether the RSI is positive (green) or negative (red). The PMO column tells you if it is rising (green) or falling (red). Finally I've added my own "Sparkle Factor" that gives you my assessment going forward, bullish (green), bearish (red) or neutral (gray). The Sparkle Factor is basically my thoughts on whether I expect it to rise or fall. A neutral means it could really go either way so it could be added to a watch list. If you're in a stock I consider "neutral" going forward, the ball is in your court.
Darling:
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.
Below are the commentary and chart from Tuesday, 9/24:
"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."
Here is today's chart:
The chart is looking better and better as the rally continues. The best part is it is still not overbought based on the RSI. The PMO has given us a Crossover BUY Signal and Stochastics have moved above 80. This one should continue higher. Keep it in the short-term trading timeframe given it has a very negative P/E ratio.
Don't forget, on Thursdays I look at reader-requested symbols, so shoot me an email at erin@decisionpoint.com. I read every email I receive and try to answer them all!
Dud:
Dell Technologies, Inc. (DELL)
EARNINGS: 2024-11-26 (AMC)
Dell Technologies, Inc. is a holding company, which engages in the provision of information technology hardware, software, and service solutions through its subsidiaries. It operates through the following segments: Infrastructure Solutions Group (ISG), Client Solutions Group (CSG), and VMware. The ISG segment includes servers, networking, and storage, as well as services and third-party software and peripherals that are closely tied to the sale of ISG hardware. The CSG segment consists of sales to commercial and consumer customers of desktops, thin client products, and notebooks. The VMware segment provides compute, cloud management, networking and security, storage and availability, and other end-user computing offerings. The company was founded by Michael Saul Dell in 1984 and is headquartered in Round Rock, TX.
Predefined Scans Triggered: Moved Above Upper Bollinger Band, Moved Above Ichimoku Cloud, P&F Double Top Breakout and Moved Above Upper Keltner Channel.
Below are the commentary and chart from Thursday, 9/26:
"DELL is down -1.38% in after hours trading so it may be ready to take back some of today's big gains. I liked today's breakout from a mini flag formation. We also have a nearing Silver Cross which would give us an IT Trend Model BUY Signal. There is the small problem of an overbought RSI, but a small decline as we see in after hours trading could alleviate this quickly. We've also seen it get far more overbought previously. The PMO is now in positive territory and is rising so we have new strength. Stochastics are holding above 80. The group is doing alright against the SPY. DELL is outperforming both the group and the SPY overall. The stop is set as close to the 20-day EMA as possible at 7.7% or $116.75."
Here is today's chart:
What went wrong here? It is simply a case of the sector pulling back today. I think the chart still looks bullish. The PMO is still rising and the RSI is still positive despite today's dastardly decline. If anything this could offer a better entry, but watch the PMO if it tips too far downward, you may want to hold off.
THIS WEEK's Performance:
DecisionPoint Market Scoreboard (Mechanical Trend Model Signals):
Friday signal changes are outlined in purple.
Click Here to view Carl's annotated "Under the Hood" ChartList!
Sector to Watch: Technology (XLK)
I picked Technology as the Sector to Watch. I could've easily picked Materials, Communication Services, Consumer Discretionary and Utilities, all of which are sailing higher. The big problem with those sectors is that the RSI is overbought on all of them, so price is overbought. Technology, on the other hand, has rising momentum and an RSI that is not overbought.
Let's look "under the hood" at Technology. (FYI - We have under the hood charts for all of the sectors, indexes and select industry groups on our website available to subscribers of any of our subscriptions on the website). Technology is overcoming the previous top from August. As noted above, the RSI is not overbought and the PMO is rising above the zero line. I particularly liked the acceleration on the Silver Cross Index, which tells us how many stocks have a 20-day EMA above the 50-day EMA. Participation of stocks above key moving averages is very healthy reading in the 80th percentile. Stochastics did top, but are firmly above 80, suggesting internal strength. We can also see outperformance against the SPY. All of this adds up to a likely advance higher.
Industry Group to Watch: Semiconductors (SMH)
The Industry Group to Watch is Semiconductors (SMH). We happen to have an under the hood chart for this group, so we'll review it. Price has reached overhead resistance and, as of this writing, it is pulling back. However, the internals look very strong. The RSI is not overbought and the PMO is rising above the zero line, indicating new strength. The Silver Cross Index is above its signal line and is reading above our bullish 50% threshold. Participation is strong and, in the case of %Stocks > 50/200EMAs, there is room for improvement before getting too overbought. Stochastics have topped but, as with Technology, they are comfortably above 80, indicating internal strength.
Go to our Under the Hood ChartList on DecisionPoint.com to get an in-depth view of all the sectors. On StockCharts.com you can find the Industry Summary.
Good Luck & Good Trading!
- Erin
erin@decisionpoint.com
Full Disclosure: I'm 60% long, 0% short.
Watch the latest episode of the DecisionPoint Trading Room with Carl & Erin Swenlin HERE!
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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 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 selection of "diamonds in the rough."
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DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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