It's ETF Day and I have three interesting selections for your review. There were quite a few ETFs to choose from in today's scans with a heavy dose of technology and large-caps. This is likely due to the great move we saw in Technology today. That can sometimes skew results a bit.
I'm going with a mega-cap ETF (MAGS), a Cybersecurity ETF (BUG) and to take advantage of this week's Sector to Watch, I'm including the Retail ETF (XRT).
The market really is due for a pullback but now that mega-caps seem to be outperforming again, it is keeping the index elevated despite participation weakening. I would make sure you have stops set on your investments and let the market take you out.
A note on yesterday's Integrated Gas & Oil stock CRGY. The chart has gone south along with Crude so I would not hang around too long in that trade. It appears to be a bad pick so proceed with caution.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": BUG, MAGS and XRT.
Runner-ups: BULZ, TECL and CIBR.
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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.
Global X Cybersecurity ETF (BUG)
EARNINGS: N/A
BUG tracks a modified market-cap-weighted global index of companies selected on the basis of revenue related to cybersecurity activities. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Green, New CCI Buy Signals, Moved Above Upper Keltner Channel, New 52-week Highs, Moved Above Upper Bollinger Band, Stocks in a New Uptrend (Aroon), Moved Above Upper Price Channel and P&F Double Top Breakout.
BUG is down -0.90% in after hours trading so it is taking back some of today's gain. The breakout today was impressive. This helped the PMO to surge (bottom) above the signal line. The RSI is overbought right now so we could see a little consolidation across this level of support first. The OBV is definitely confirming this rally and Stochastics have just reached above 80. The relative strength line is rising strongly so it is doing very well against the SPY right now. The stop is set beneath the 50-day EMA at 7.1% or $32.05.
This was an important breakout above the 2021 price high. This is a very bullish breakout. The weekly RSI is positive and not overbought. The PMO is rising on a Crossover BUY Signal after bottoming above the zero line. The StockCharts Technical Rank (SCTR) is in the hot zone* above 70. Consider a 17% upside target to about $40.38.
*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.
Roundhill Big Tech ETF (MAGS)
EARNINGS: N/A
MAGS is an actively managed fund that offers highly concentrated exposure to the largest and most liquid leading technology stocks. The fund invests primarily through swaps and forwards. Click HERE for more information.
Predefined Scans Triggered: Moved Above Upper Bollinger Band, P&F Double Top Breakout, P&F Triple Top Breakout, Moved Above Upper Keltner Channel and New 52-week Highs.
MAGS is up +0.02% in after hours trading. This is basically a Magnificent Seven ETF, hence its name MAGS. These stocks are starting to show relative strength and could keep the market elevated further. You could also go for a more diversified ETF like IGV or XLK if you'd prefer. The breakout yesterday was excellent and today saw a followthrough day. The RSI is positive and not yet overbought. The PMO is on a new Crossover BUY Signal. Stochastics are rising strongly toward 80 in positive territory. Relative strength tells us that these guys have already been outperforming the market. I think they can continue to as long as the market stays afloat. Be sure and set a stop as this could be the first place weakness appears. I've set the stop below support at 7.7% or $49.74.
This has a strong rising trend that isn't parabolic. That is very bullish. The weekly RSI has gotten overbought, but as we can see from history, it can stay overbought for weeks at a time. The SCTR is in the hot zone. Consider a 17% upside target to about $63.05.
SPDR S&P Retail ETF (XRT)
EARNINGS: N/A
XRT tracks a broad-based, equal-weighted index of stocks in the US retail industry. Click HERE for more information.
Predefined Scans Triggered: Moved Above Upper Price Channel, P&F Ascending Triple Top Breakout, P&F Double Top Breakout and Moved Above Upper Keltner Channel.
XRT is unchanged in after hours trading. We have a nice flag formation here. We do also see an island for price which could resolve downward, but I'm counting on the flag. An island reversal doesn't seem likely given the internals. I have an under the hood chart for XRT. Notice that participation is very strong and holding at high levels. The Silver Cross Index is on the rise. The RSI is not overbought yet. The PMO is rising on a Crossover BUY Signal and Stochastics are above 80. I'm looking for a breakout from this flag. I've set the stop as close to the prior price low as I could at 8% or $77.21.
The weekly chart is bullish on this recent breakout. It does appear ready to test the 2021 high. The weekly RSI is positive and not yet overbought. The weekly PMO is rising on a Crossover BUY Signal that occurred above the zero line. The SCTR is not in the hot zone, but it is headed that direction.
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 60% 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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