The Coronavirus has put its stamp on society and the market with a ferocity that I don't believe anyone would have anticipated. However, given that we do know what the cause of much of the crisis is, I am finding pockets of strength from which to draw my Diamonds from. I decided to use a scan that catches those 'middle-of-the-road' stocks but modify it to allow for SCTR values above 80. The scan normally calls for stocks with SCTR values between 70 and 80. The results were quite interesting. I found a few stocks that are even breaking to new highs or near to it. Netflix (NFLX) arrived in the scan results and as promised, when I get 'big names' in the results, I will report them. I very much like Netflix and I believe it will continue to outperform the market. I do caveat "outperformance" may not mean rising quickly, it can often mean falling slower when we're in a market environment like the one we are experiencing now. Full disclosure, I will be looking to enter NFLX tomorrow. I would still recommend that if you are an intermediate-term trader or one that can't watch your charts more than once a day, it would be safest to stay out. I'm beginning to see that if I can shorten my time horizon and spend more time watching, there could be short-term gains to be made. I am NOT seeing this as a market bottom. More pain will be coming, but in the meantime finding palatable entries with stops that don't assume huge losses works for me right now.
To that end, I'm teaming up with Mary Ellen McGonagle (MEMInvestmentResearch.com) to do a "LIVE Trading Room" event tentatively set for this Thursday. The event will be offered for free the first few times and then depending on the interest level, we will offer it as an "add-on" at a discount for our subscribers and a much higher full-price charge for those not subscribing to DecisionPoint.com. I will be sending out a link to join the room which will likely open at 8:50a EST on Thursday 4/2. I'll keep you posted!
Docusign Inc (DOCU) - Earnings: 6/4/2020 (AMC)
DOCU broke to new all-time highs today but settled just under the February high. The PMO is on a BUY signal and rising strongly. OBV is confirming the current rally and the SCTR has been outstanding. A high SCTR tells us that DOCU has relative and internal strength. Setting a stop will be challenging due to the volatility, so consider it carefully.
The weekly chart is showing a bullish rising trend and new PMO BUY signal today.
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!
eHealth Inc (EHTH) - Earnings: 4/23/2020 (AMC)
While I'm not a fan of the Financial sector, there are some interesting plays in this area. We have a PMO BUY signal and a PMO which is somewhat overbought, but certainly could accommodate more upside movement. There is a nice OBV positive divergence, but honestly I think the current rally has resolved it. The SCTR is strong. Setting a stop won't be quite as challenging given a good support area lies only about 8% down.
Anyone familiar with Carl's and my analysis know that we are especially sensitive to the parabolic formations. They can be dangerous. EHTH hasn't broken down from the parabolic move, but likely will. For now, the weekly PMO looks great and it is working on making new all-time highs.
Don't forget, on Thursdays I look at reader-requested symbols, so shoot me an email at email@example.com. I read every email I receive and try to answer them all!
Netflix Inc (NFLX) - Earnings: 4/21/2020 (AMC)
As noted in the introduction, I'm hoping to enter NFLX sometime tomorrow. I'm hoping to see it open around 370 or so. Setting a stop is comfortable at 10%. The OBV is confirming the current rally and the PMO BUY signal is good to see. NFLX has returned to the top in SCTR ranking and I suspect that will continue.
The weekly PMO looks fantastic. It is not overbought and it has bottomed above the signal line which is especially bullish. I note an ascending triangle, or you could draw a declining tops line to form a symmetrical triangle. Either way, both are bullish patterns and suggest an upside breakout.
Stercycle Inc (SRCL) - Earnings: 4/30/2020 (BMO)
I thought this was an interesting bottom fishing opportunity. I think the $48 area of support looks good. I'd like to see a close above the 20-EMA. The PMO has turned up sharply in response to the recent rally. I do note that we had a similar looking PMO bottom in the middle of March that did not pan out. This one looks more viable. The SCTR is moving back into the hot zone above 75.
As with most bottom fishing opportunities, they come with ugly weekly charts. Price broke below the rising trend line, but is recovering this week. $65 - $70 would be my target.
Watsco Inc (WSO) - Earnings: 4/21/2020 (BMO)
I like the set-up on this chart. First is the very nice OBV positive divergence. Price closed above the 20-EMA today. The PMO is rising and should give us a BUY signal shortly. The SCTR is in a very healthy range. Setting a stop is easy here too. I might have to watch this one tomorrow for possible entry.
The weekly chart tells you why this is a short-term trade. We have a giant bearish double-top lurking on the chart. The last decline didn't quite hit the confirmation line at $125, but it is vulnerable.
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: 4
- Diamond Dog Scan Results: 0
- Diamond Bull/Bear Ratio: 4.00
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Full Disclosure: I do not own any of the stocks above. I'm currently 85% in cash.
Erin Swenlin will be presenting at the The MoneyShow Las Vegas to a date to be announced in August 2020! You'll have an opportunity to meet Erin and discuss the latest DecisionPoint news and Diamond Scans. Claim your FREE pass here! You can watch online with this pass too!! There will be online events held in May and when I have more information I'll let you know.
Watch the latest episode of DecisionPoint with Carl & Erin Swenlin LIVE on Mondays 5:00p EST or on the StockCharts TV YouTube channel here!
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."
Helpful DecisionPoint Links:
DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
For more links, go to DecisionPoint.com!