Well the market hit new all-time highs today and that caused the Surge Scan to come through with many different S&P 500 oriented ETFs. I'm not presenting an ETF that follows the large-caps, but I certainly could have. It appears that strength has arrived on the SPY again, I am still concerned this won't stick, but I'm not going to argue with all-time highs and all of the results on the Surge Scan. We just need to be careful of a bull trap.
The ETFs I did pick track to the market in general, but are more directed toward certain spaces within the index. I have a Bank ETF, Semiconductor ETF and Internet ETF. Be sure and use stops as the market could turn on us at any time given internals aren't strong right now. We could be looking at another pointed rally among large- and mega-cap stocks. Mega-caps are beginning to outperform the SPY again. You'll find some SPY oriented ETFs in the runner-ups.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": FDN, KBWB and SOXX.
Runner-ups: MTUM, CGGR, DYNF and GSLC.
Diamond Mine Trading Room:
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Topic: DecisionPoint Diamond Mine LIVE Trading Room
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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.
First Trust Dow Jones Internet Index Fund (FDN)
EARNINGS: N/A
FDN tracks a market-cap-weighted index of the largest and most liquid US Internet companies. Click HERE for more information.
Predefined Scans Triggered: Moved Above Upper Price Channel, New CCI Buy Signals, P&F double Top Breakout, P&F Triple Top Breakout, Moved Above Upper Keltner Channel and New 52-week Highs.
FDN is down -0.35% in after hours trading. We finally have a solid breakout above overhead resistance. This rally is coming off a bull flag formation. The minimum upside target of the pattern would take price to about $235. I will also say that the Communications Services (XLC) ETF also arrived in scan results and this is a subset, clearly a strong subset. The RSI is getting overbought so a pause may be in order. The PMO has surged (bottomed) above the signal line and is well above the zero line indicating pure strength. Stochastics are also above 80 right now. We have excellent relative strength. The stop is set beneath the August top at 6.5% or $202.79.
I love the breakout from the recent trading range. Add to that a positive and not overbought RSI as well as a new weekly PMO Crossover BUY Signal and we should expect upside followthrough on this breakout. The StockCharts Technical Rank (SCTR) is in the hot zone* which tells us it is set up well in the intermediate and long terms. We should see it move to all-time highs.
*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.
Invesco KBW Bank ETF (KBWB)
EARNINGS: N/A
KBWB tracks a modified market-cap-weighted index of US banking firms. Click HERE for more information. They don't list the top ten holdings.
Predefined Scans Triggered: Stocks in a New Uptrend (Aroon), Moved Above Upper Price Channel, New CCI Buy Signals and New 52-week Highs.
KBWB is down -0.10% in after hours trading. I liked today's breakout from a bullish ascending triangle (flat top, rising bottoms). It implies upside follow through. The RSI is not overbought and the PMO is on a new Crossover BUY Signal above the signal line. Stochastics are above 80. We can see that the Bank group is improving its relative strength over the SPY. The stop is set between the September and October lows at 6.2% or $55.74.
We have a solid rising trend and a break above prior resistance. The weekly RSI is not overbought so it can accommodate more upside. The weekly PMO is flat above the zero line implying pure strength in the intermediate term. The SCTR is at the top of the hot zone above 70. Look for price to recapture the 2022 high.
iShares Semiconductor ETF (SOXX)
EARNINGS: N/A
SOXX tracks a modified market-cap-weighted index of 30 US-listed semiconductor companies. Click HERE for more information.
Predefined Scans Triggered: New CCI Buy Signals.
SOXX is down -0.11% in after hours trading. There are two bullish formations on the SOXX chart. We have a large double bottom at the August/September lows. We also have a bullish pennant formation or pennant on a flagpole. Today we saw a breakout from that pennant. The RSI is positive and not at all overbought. The PMO has surged above the signal line and above the zero line. Stochastics are moving higher toward 80. We can see that SOXX has been outperforming the SPY as well. If this rally is for real, this will be one of the benefactors. The stop is set below the pennant at 6.4% or $220.10.
The weekly chart is mixed. We still have a long-term rising trend, but price is chopping around a new trading range. We had a bearish head and shoulders formation that is in the process of being busted. The weekly RSI is positive and far from overbought. The weekly PMO is attempting to bottom. The SCTR is nearly in the hot zone. Consider a 17% upside target to about $275.13.
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 55% 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