It's a new week and I have to say, I wasn't overly impressed with today's scan results. The charts I liked best were all overbought on the RSI. While those overbought conditions can persist, I prefer to look for RSI's that aren't overbought yet.
I believe today's selections are good and certainly have some good upside potential. I did avoid reversal candidates as I'm not convinced the market is bullish enough. Reversal candidates carry extra risk. I consider stocks that trade beneath their 50/200-day EMAs to be reversal candidates. By their nature, they usually carry a Dark Cross on the 20/50-day EMAs which gives them a bearish bias and they usually carry a Death Cross which tells us the stock is in a bear market. We have to be careful with those. Today I chose stocks more with the "winners that keep on winning" attitude.
One of them will report tomorrow so it's anyone's guess how it will open. I tried to avoid this, but the chart just looked too bullish not to include it. Nine predefined scans were triggered on StockCharts.com so there does seem to be something to this one. If we see a big decline on earnings, be sure the PMO is still pointed upward if you take advantage of a lower price point.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": CLH, CTRE, KLIC and NOW.
Runner-ups: AIT, STT, CNK and KNF.
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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.
Clean Harbors, Inc. (CLH)
EARNINGS: 2024-10-30 (BMO)
Clean Harbors, Inc. engages in the provision of environmental, energy, and industrial services. It operates through the Environmental Services and the Safety-Kleen Sustainability Solutions segments. The Environmental Services segment consists of the technical services, industrial services, field services, and oil, gas, and lodging businesses. The Safety-Kleen Sustainability Solutions segment includes parts washer services, containerized waste services, vac services, used motor oil collection, and sale of base and blended oil products. The company was founded by Alan S. McKim in 1980 and is headquartered in Norwell, MA.
Predefined Scans Triggered: Elder Bar Turned Green, New CCI Buy Signals, New 52-week Highs, Stocks in a New Uptrend (ADX), Stocks in a New Uptrend (Aroon), Moved Above Upper Price Channel, Parabolic SAR Buy Signals, P&F Double Top Breakout and P&F Triple Top Breakout.
CLH is up +1.75% in after hours trading which suggests to me it will do well on earnings. Today's breakout executes a bull flag formation whose upside target is around $285. The RSI is not overbought yet. The PMO has whipsawed into a Crossover BUY Signal well above the zero line signifying strength. The OBV is confirming the rally. Stochastics have turned back up. The group is really starting to breakout based on relative strength. It has done very well against the group and consequently it is outperforming the SPY. The stop is set at the 50-day EMA at 6.6% or $246.00.
This is a strong weekly chart. We have an incredible rising trend that has persisted all year. It is not parabolic so it could continue to make its way higher without a serious breakdown. The weekly RSI is overbought, but it can hold that condition for weeks. The weekly PMO is on a Crossover BUY Signal and is rising. The StockCharts Technical Rank (SCTR) is in the hot zone*. Consider a 17% upside target to about $308.17.
*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.
CareTrust REIT, Inc. (CTRE)
EARNINGS: 2024-10-29 (AMC)
CareTrust REIT, Inc. engages in the ownership, acquisition, and leasing of healthcare-related properties. It offers independent living, memory care, and assisted, and skilled nursing facilities. The company was founded on October 29, 2013 and is headquartered in San Clemente, CA.
Predefined Scans Triggered: Moved Above Upper Keltner Channel, New 52-week Highs, Stocks in a New Uptrend (Aroon), Moved Above Upper Price Channel, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
CTRE is down -2.79% in after hours trading. They reported earnings after the bell today and based on after hours trading, it may hiccup tomorrow, but that could offer a better entry. The RSI is starting to get overbought, but we can see it can hold overbought conditions for some time. Ultimately it consolidated sideways rather than dropping lower and now it has broken out. The PMO is on a new Crossover BUY Signal and Stochastics are above 80. Relative strength for the group is rising and not falling. CTRE is performing very well against the SPY and has shown leadership based on the long running rising relative strength against the group. I've set the stop below support at 7.3% or $29.58.
The weekly chart implies more upside. It is on a nice rising trend that isn't too steep. We have the breakout to new 52-week highs. We do see that the weekly RSI is overbought right now, but it has been for weeks so I don't see why it won't continue a bit longer. The weekly PMO is accelerating higher above the signal line well above the zero line. The SCTR is in the hot zone. Consider a 17% upside target to about $37.35.
Kulicke and Soffa Industries, Inc. (KLIC)
EARNINGS: 2024-11-13 (AMC)
Kulicke & Soffa Industries, Inc. engages in the design, manufacture, and sale of semiconductor and electronics assembly solutions. The firm operates through the Ball Bonding Equipment, Wedge Bonding Equipment, Advanced Solutions, and Aftermarket Products and Services (APS) segments. The Ball Bonding Equipment segment involves the design, development, manufacture and sale of wafer level bonding equipment. The APS segment includes the variety of tools, spares and services for the equipment. The company was founded by Frederick W. Kulicke and Albert Soffa in 1951 and is headquartered in Fort Washington, PA.
Predefined Scans Triggered: Moved Above Upper Bollinger Band, Moved Above Upper Price Channel, New CCI Buy Signals and Moved Above Upper Keltner Channel.
KLIC is unchanged in after hours trading. I liked today's strong breakout move. It is a Semiconductor and I am optimistic about that group moving forward. Relative strength for the group is excellent. The RSI is rising and is not overbought. The PMO is on a Crossover BUY Signal that occurred well above the zero line. Stochastics are rising strongly toward 80. Relative strength for KLIC against the group is improving which is why we see rising relative strength against the SPY. The stop is set at the 50-day EMA or $43.78. I don't consider this a reversal candidate because price is above the 50/200-EMAs and we have a Silver Cross of the 20/50-day EMAs.
This is a trading range stock which I generally am not a fan of, however, in this case price is headed back to the top of the range and if it does we have an excellent return and a likely place to book profits. The weekly RSI is positive and rising. We don't have overbought conditions. The weekly PMO has returned a Crossover BUY Signal and the SCTR is on its way to the hot zone above 70.
ServiceNow, Inc. (NOW)
EARNINGS: 2025-01-22 (AMC)
ServiceNow, Inc. engages in the provision of an end-to-end workflow automation platform for digital businesses. Its Now Platform is a cloud-based solution embedded with artificial intelligence (AI) and machine learning (ML). The company was founded by Frederic B. Luddy in June 2004 and is headquartered in Santa Clara, CA.
Predefined Scans Triggered: P&F High Pole.
NOW is up +0.09% in after hours trading. They popped higher on earnings, but we do have an island formation. This could imply a gap down move ahead, but given the indicators I think that will be avoided. Price has essentially broken out of a trading range. It avoided confirming the double top formation. The RSI is not overbought and the PMO is nearing a Crossover BUY Signal. The one problem is that Stochastics tipped over, but they are still in positive territory. Relative strength studies are all positive with rising relative strength lines across the board. The stop is set at 6.6% or $890.17.
We have a strong breakout from a congestion zone. The weekly RSI is positive and not overbought and the weekly PMO is rising on a Crossover BUY Signal. The SCTR is in the hot zone. Consider a 17% upside target to about $1115.10.
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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 65% 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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