I'll tell you up front, there were zero results on the DecisionPoint scans today for Diamonds. A couple of bond funds appeared in Carl's Scan but my scans produced 2 stock each and trust me they aren't worth mentioning. This is not the time to expose yourself further. However, like yesterday, I want to point out some pockets of possible strength. The graphic below shows all of the sector 6-month charts. I determined that XLU and XLRE have been the least damaged by this decline and I suspect when we get off this rollercoaster, these two sectors might be your best bet. Notice that both are currently holding onto their 50-EMAs as possible support; whereas the other sectors are testing or are below their 200-EMAs. Generally in a bear market environment, rallies come off the back of defensive sectors like XLU, XLRE, XLP and XLV.
Right now, support is about 4% away from the current price. The PMO is falling almost vertically, moving the PMO quickly out of overbought territory, possibly in preparation for the next rally. I don't think we are done seeing most stocks decline. As I said yesterday, "we will drink no wine before it is time". It's not time, but let's look at some of the strongest performers in this sector based on their StockCharts Technical Ranking (SCTR) if they had one.
Ameren Corp (AEE) - SCTR Rank 90.2 - Earnings: Reported this AM
Ameren reported earnings this morning, beating earnings estimates but down on revenue. Investors didn't mind and it closed around the midpoint of its high-low range today. The PMO is on a SELL signal and is overbought, so I would look for sideways action or decline if the market it moves lower. There is a flag formation which usually resolves to the upside and marks the beginning of a longer-term rally. The SCTR just entered the "hot zone" above 75.
The weekly PMO is positive and somewhat overbought, but it is rising and there is room for it to rise higher. The line in the sand for me would be $80.
Welcome to DecisionPoint Daily Diamonds, wherein I highlight five "diamonds in the rough." 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!
Avista Corp (AVA) - SCTR Rank 71.6 - Earnings: Reported this AM
Today's wild OHLC bar was due to earnings being release this morning. The news was good, but the market pulled back much of those early morning gains. Obviously the PMO is a problem on the daily chart and you'll see this on all of these charts. The SCTR is nearing the 'hot zone' above 75 and support is holding on the price chart. This might be one to add to the watchlist for later unless you want to set a tight stop.
The weekly chart is still fairly positive except the sharp top of the PMO, but that is due to this week's unusual market action.
Don't forget, on Thursdays I look at reader-requested symbols, so shoot me an email at firstname.lastname@example.org. I read every email I receive and try to answer them all!
NextEra Energy Partners LP (NEP) - Earnings: 3/12/2020 (AMC)
Obviously a large breakdown. Price closed on the 20-EMA, but I suspect it will have to test the 50-EMA like XLU has done. It's been a great performer this year and I suspect once the PMO moves out of overbought territory, it will be attractive soon.
The weekly PMO is still rising and is not overbought.
National Grid Group (NGG) - SCTR Ranking 94.0 - Earnings: 5/21/2020 (BMO)
NGG tested and closed below the 20-EMA yesterday, but recovered nicely today. Like NEP, I would look for a test of the 50-EMA before going in on this one. The PMO is moderately overbought now and should clear those conditions completely soon. Notice that the OBV didn't lose much ground. Not that many sellers here, so it could recover sooner rather than later. The SCTR is very strong and you can see it has been a great performer. Even this pullback was tame in comparison to others.
I can almost make out a cup shape or rounded bottom on the weekly chart. The PMO decelerating in overbought territory, but overall it isn't too bad given this week's market action.
WEC Energy Group Inc (WEC) SCTR Ranking 83.4 - Earnings: 5/4/2020 (BMO)
WEC hasn't been hit that hard on this decline. The 20-EMA looks like it could hold up, but with the overall market struggling, it may have to test the September top. The PMO is on a SELL signal and falling which isn't a surprise. When it begins to turn, that will be our signal to consider entry. Volume hasn't been that crazy on the sell-off in comparison to others and the SCTR is still quite healthy.
Weekly PMO is rising and is not overbought. Support is nearby so it will be interesting to see how overall market pressure will affect it.
Current Market Outlook:
Market Environment: It is important to consider the odds for success. The Silver Cross Index measures the percentage of stocks on IT Trend Model BUY signals (20-EMA > 50-EMA), while the Golden Cross Index measures the percentage of stocks on LT Trend Model BUY signals (50-EMA > 200-EMA). Don't forget that as a "Diamonds" member, you have access to our GCI/SCI curated ChartList on DecisionPoint.com. You'll find it under "Members Only" links on the left side on the Blogs and Links Page. Here are the current percentages on the Silver and Golden Cross Indexes:
- Diamond Scan Results: 0
- Diamond Dog Scan Results: 35
- Diamond Bull/Bear Ratio: 0.00
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Full Disclosure: I do not own any of the stocks above. I'm currently 35% in cash.
Erin Swenlin will be presenting at the The MoneyShow Las Vegas on May 11-13, 2020! You'll have an opportunity to meet Erin and discuss the latest DecisionPoint news and Diamond Scans. The conference is free to attend or view online!
Technical Analysis is a windsock, not a crystal ball.
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."
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