It was a challenging day for readers on Reader Request Day, but you did very well. The big problem is overbought conditions which are now plaguing the charts after yesterday's tremendous rally. I did find some requests that weren't entirely overbought.
One of the choices is in Retail which I'm watching very closely right now for a breakout move. Seasonality should begin working for those stocks as we near the holiday season. November tends to be a good month.
Another is a Semiconductor which I expect to continue to perform well as the industry group chart looks pretty good. This one is showing rising relative strength against the group so it is showing leadership even though it is not at all-time highs like NVDA.
The third stock I'm presenting was requested by two people so it seemed an obvious stock for discussion.
Tomorrow is the Diamond Mine trading room. It will be interesting to see if we get a hangover from the last two days of rally. Registration information is below. I got the right date this week! Sorry for last week's confusion with listing the wrong day.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": DNLI, SMTC and TJX.
Other requests: RUN, IONQ, NCLH, ZIM, AUPT, MDU, LNG, FOUR and CLB.
Diamond Mine Trading Room:
RECORDING & DOWNLOAD LINK (11/1/2024):
Topic: DecisionPoint Diamond Mine (11/1/2024) LIVE Trading Room
Recording & Download Link
Passcode: November#1
REGISTRATION for 11/8/2024:
When: November 8, 2024 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine LIVE Trading Room
Register in advance for this webinar HERE
After registering, you will receive a confirmation email containing information about joining the webinar.
Below is the latest free DecisionPoint Trading Room recording from 11/4. 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.
Denali Therapeutics Inc. (DNLI)
EARNINGS: 2025-02-25 (AMC)
Denali Therapeutics, Inc. is a biopharmaceutical company, which engages in the development and commercialization of a portfolio of product candidates for neurodegenerative diseases. Its product pipeline includes LRRK2, RIPK1, TREM2, and Tau. The company was founded by Ryan J. Watts, Marc Tessier-Lavigne, and Alexander Schuth on October 14, 2013 and is headquartered in San Francisco, CA.
Predefined Scans Triggered: Shooting Star.
DNLI is unchanged in after hours trading. I liked the breakout from a small trading range that set up above strong support. The declining trend has also been busted. The RSI is positive and is not overbought. The PMO is on a rather new Crossover BUY Signal and Stochastics are above 80. Relative strength isn't great for the group which is unfortunate, but it is outperforming the group and the SPY which is most important. Biotechs are due for a reversal, but we'll see. The stop is set around the 20-day EMA at 7.4% or $27.40.
I like seeing the rounded bottom that has set up a nice base for DNLI. The weekly RSI is positive and not overbought yet. The weekly PMO has surged (bottomed) above the signal line and the StockCharts Technical Rank (SCTR) is in the hot zone* above 70. There is plenty of upside potential here.
*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.
Semtech Corp. (SMTC)
EARNINGS: 2024-12-04 (AMC)
Semtech Corp. engages in the manufacture and supply of analog and mixed signal semiconductor products for high-end consumer, enterprise computing, communications, and industrial equipment. The firm operates through the following business segments: Protection, Signal Integrity, and Wireless & Sensing. It offers signal integrity, protection, wireless and sensing, and power and high-reliability products. The company was founded in 1960 and is headquartered in Camarillo, CA.
Predefined Scans Triggered: Moved Above Upper Price Channel, P&F Ascending Triple Top Breakout, P&F Double Top Breakout, Moved Above Upper Keltner Channel and New 52-week Highs.
SMTC is up +0.43% in after hours trading. Today's breakout got me on this chart. It is also in Technology which is seeing strength. The Semiconductor group is doing quite well too based on relative strength. The RSI is positive and not yet overbought. There is a brand new PMO Crossover BUY Signal above the zero line and Stochastics are above 80. Relative strength for SMTC shows it is a leader within the group right now and it is outperforming the SPY. The stop is set arbitrarily at 7.7% or $46.68.
We have another nice rounded bottom base that price has made its way out of. The weekly RSI is not yet overbought and the weekly PMO has surged above the signal line well above the zero line. The SCTR is in the hot zone. It would be an over 15% gain if it reaches overhead resistance, but I'm looking for a breakout with an upside target around 25%.
TJX Cos., Inc. (TJX)
EARNINGS: 2024-11-20 (BMO)
The TJX Cos., Inc. engages in the retail of apparel and home fashion products. It operates through the following business segments: Marmaxx, HomeGoods, TJX Canada, and TJX International. The Marmaxx segment sells family apparel including apparel, home fashions, and other merchandise. The HomeGoods segment offers an assortment of home fashions, including furniture, rugs, lighting, soft home, decorative accessories, tabletop and cookware as well as expanded pet, kids, and gourmet food departments. The TJX Canada segment operates the Winners, Marshalls, and HomeSense chains in Canada. The TJX International segment includes operations of T.K. Maxx and Homesense chains in Europe and the T.K. Maxx chain in Australia. The company was founded by Bernard Cammarata in 1962 and is headquartered in Framingham, MA.
Predefined Scans Triggered: None.
TJX is unchanged in after hours trading. The declining trend is still intact, but I like the double bottom that is developing here. If it confirms with a breakout above the confirmation line (middle of the "W"), the upside target of the pattern would mean a breakout. The RSI is positive and not at all overbought. The PMO is on a new Crossover BUY Signal. I'd prefer it above the zero line so there is some risk involved here. Stochastics look very good as they rise vertically. This industry group isn't performing very well and that could put some downside pressure on the stock, but the sector is doing very well. TJX is performing in line with the SPY which is acceptable and it does show excellent outperformance against the group. I've set the stop beneath the double bottom pattern about halfway down the next support range at 6.7% or $109.02.
The weekly chart could use some help as this declining trend doesn't look healthy right now. The weekly RSI is positive which is good and while the weekly PMO is declining, it is also decelerating that decline. The SCTR is outside the hot zone, but is far from the basement. It is also rising right now. Overall I would keep this in the short-term timeframe. Consider a 17% upside target to about $136.71.
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 75% 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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