Scans have stopped producing many results and this has been occurring slowly over time. The market has topped and it appears ready to head lower for a little while. The ETF scans returned only inverse and shorting ETFs so it was a given that I would be presenting inverses.
However, I did take a look at the UNG chart and it looks like a really good reversal coming off all-time lows. It's UNG so it doesn't always follow through, but given the light day on the scans, I thought I'd present it. The PMO hasn't turned up yet so it is early.
Remember that these inverse ETFs are short-term horizon only. They will likely turn back around in a week or two, so be nimble. Market internals are weak enough that I think we will see at least a week of lower prices.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": SARK, TWM and UNG.
Runner-ups: PFIX, MJ and QID.
Diamond Mine Trading Room:
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Topic: DecisionPoint Diamond Mine (10/18/2024) LIVE Trading Room
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Below is the latest free DecisionPoint Trading Room recording from 10/21. 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.
Tradr 2X Short Innovation Daily ETF (SARK)
EARNINGS: N/A
SARK is an actively managed fund that seeks to achieve -2x the return, for a single day, of the ARK Innovation ETF (ARKK) through swap agreements with major global financial institutions. Click HERE for more information.
Predefined Scans Triggered: P&F Double Bottom Breakdown, Elder Bar Turned Green and Parabolic SAR Buy Signals.
SARK is down -2.98% in after hours trading so maybe we will see an upside reversal on the market. It would offer a better entry on this hedge position. I'm down on the Nasdaq and nearly presented QID, but I opted to go with this ETF instead. I think either is good for the job. There is a double bottom pattern that suggests we will get a move back up to $32.00. The RSI just entered positive territory and there is a new PMO Crossover BUY Signal. Stochastics are on the rise. Technically OBV bottoms are rising and price bottoms were declining so that is a positive OBV divergence. We can see that the ETF is beginning to outperform the market on its decline. The stop is very deep and that is due to the fact that this is a leveraged ETF so we have to be ready to absorb more decline than we may want to. The stop is set at 10.3% or $24.96.
Not surprisingly the weekly chart looks terrible. As noted in the opening, these are very short-term positions that are there to hedge your buy and holds. It is no wonder that the StockCharts Technical Rank (SCTR) is in the basement, nowhere near the hot zone*. I think it could get above the next level of resistance, but even if it doesn't we could see a 15% gain on the hedge.
*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.
ProShares UltraShort Russell2000 (TWM)
EARNINGS: N/A
TWM provides 2x inverse exposure to a market-cap-weighted index of US small-cap companies. Click HERE for more information.
Predefined Scans Triggered: Bullish MACD Crossovers and Parabolic SAR Buy Signals.
TWM is up +0.41% in after hours trading. Price is bouncing off strong support. The RSI is now in positive territory. There is a new PMO Crossover BUY Signal and Stochastics are headed higher. There is a clear positive OBV divergence as OBV bottoms are rising while price bottoms were falling. We can see that we are getting outperformance as the market weakens. The stop is set beneath support at 7.5% or $8.60.
As with SARK, the weekly chart looks terrible, but for a very short-term hedge that doesn't matter much. The weekly RSI is negative. I checked and the weekly PMO has turned up briefly. If price can get back to resistance, this could be a very good hedge.
United States Natural Gas Fund (UNG)
EARNINGS: N/A
UNG holds near-month futures contracts in natural gas, as well as swap contracts. Click HERE for more information.
Predefined Scans Triggered: P&F High Pole.
UNG is up +0.14% in after hours trading. We're getting on this one early as the chart hasn't completely matured yet. The RSI is negative, but it is rising as price makes its way higher. The PMO is unfortunately still pointed down but given the prior decline, it should be. Still we should be cautious. Stochastics are rising nicely out of deeply negative territory. We're starting to see UNG outperform the SPY. We can easily set a stop beneath the prior low at 7.7% or $12.75.
Price is bouncing off all-time lows and while it could still set a new all-time low, this looks very encouraging. Not a surprise that the weekly RSI is negative right now. You'll be interested to know that the weekly PMO has turned up (I had to check it with a zoom thumbnail). Its main problem is that it topped beneath the signal line previously. The SCTR is in the basement. If it can just reach its prior high, that would be a 26%+ gain.
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 65% long, 0% short. I own UNG.
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