The market is pulling back. While that can be a problem with your current holdings, it does open up some prospects when a strong stock pulls back. I don't think the market is quite done with this pullback, so you may want to add some of these to a watch list so that you can take FULL advantage of a bearish continuation and then swoop in. I just looked at Costco yesterday as a diamond in the rough that had just pulled back. Today was a strong follow-on to the decline. That makes the stock even more interesting to me and therefore is on my watch list for an add when momentum begins to build in the very short term (30 min charts). Below is the daily chart for COST with my annotations from yesterday. We lost big time support today at the 2019 tops as well as the 20-EMA. COST could pullback even more. I do believe this should be on a watch list with monitoring of the 30-min chart.
Had I been looking to enter today, I would've been watching the 30-min chart below. Notice that momentum never really turned up, even on the mid-day rebound. Consequently, I wouldn't have entered.
Announcement: DP Diamonds will now be published Mondays, Tuesdays and Thursdays (reader request day). We have moved the DecisionPoint Show to Wednesdays from Mondays so my time constraints have caused me to move publishing of DP Diamonds. From here on out the DP Show is being recorded on Wednesday afternoons and will air 8:00a EST on Thursday. You'll find the SCTV programming schedule here. Our YouTube channel can be reached here.
Live Trading Room - Tuesdays/Thursdays
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Here is the link for tomorrow's live trading room with Mary Ellen McGonagle.
Adverum Biotechnologies Inc (ADVM) - Earnings: 5/6/2020 (AMC)
I have three biotech "diamonds" today. These are the kind of pullbacks I like to see. Price pulled back to the confirmation line of the bullish double-bottom pattern. If you look in the thumbnail, the rising trend wasn't compromised today even with an 11.59% decline. Given that, the double-bottom pattern is still in play. The PMO only decelerated slightly on this large decline. The OBV is still positive and while the RSI has turned down, the rising trend is still intact.
The weekly chart is favorable. The PMO has turned back up and I spy a bullish ascending triangle pattern. The expectation of that pattern is an upside breakout with a rally that is the size of the back of the pattern. Honestly, I would be happy if price simply went up and tested the top of this pattern as that would give me a gain of nearly 35%!
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!
Alnylam Pharmaceuticals Inc (ALNY) - Earnings: 4/29/2020 (BMO)
Here is biotech number two. I won't deny the parabolic rise from the bear market low. They are dangerous, but with a reasonable stop, it might be worth a try as this could keep running. A nearly 5% pullback makes this quite interesting, especially since it held onto support at the February top. The PMO isn't faltering and the RSI is trending higher. A few caveats, the RSI is overbought and is turning over. Additionally, as of writing this, it is down 0.62% in after hours trading. I wouldn't dismiss this one since we do have the Silver Cross IT Trend Model BUY signal and a healthy OBV.
The weekly PMO is on track to switch to a BUY signal after Friday's close. I have to say, I didn't expect to see a break down below support at the 2015 high. That also tells us to watch it carefully before a possible entry.
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!
Activision Blizzard Inc (ATVI) - Earnings: 5/5/2020 (AMC)
As of publishing, ATVI is up over 1% in after hours trading so it is already erasing today's pullback should the after hours trend continues. That's okay. You can set a reasonable stop and there is still plenty of upside potential based on the PMO and rising RSI. The OBV is still on a rising trend despite the pullback.
An over 25% upside potential on this one with a breakout above the 2017 tops proves my point that it is still a favorable entry point. The PMO triggered a BUY signal last week.
DexCom Inc (DXCM) - Earnings: 4/28/2020 (AMC)
I covered DXCM in the April 1st Diamonds Report. It didn't do much but consolidate through the first part of April, but that formed a bull flag. Now we have a breakout. Today's 4.6% decline took price right to strong support at the February top. You can set a reasonable stop to the top of the flag. The PMO is rising and is not particularly overbought. Both the RSI and OBV are in rising trends. Currently DXCM is up 1.82% in after hours trading.
The weekly PMO is rising nicely and while somewhat overbought, we've seen higher readings.
iShares Nasdaq Biotechnology ETF (IBB) - Earnings: N/A
I decided to share an ETF today. It came up in the scan results and since I gave you two biotechs, I decided a look at the ETF was a good idea. Today's pullback brought price below support at the 2019 top. The steep rising trend line hasn't been breached yet. The RSI is rising nicely and the PMO is rising and isn't particularly overbought. It is down slightly in after hours trading. I might hold off on this one until the gap in the thumbnail is closed or we get a test of the rising bottoms trendline.
We can see on the weekly chart how important the $123 level is. I'd want to see that hold. Currently the weekly PMO is on a BUY signal that would go final on Friday.
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: 85
- Diamond Bull/Bear Ratio: 0.00
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Full Disclosure: I do not own any of the stocks above and I'm currently 20% in cash. My trading timeframe has moved from intermediate-term to short-term and therefore I'm investing more. It is strange to be this invested in a bear market, but the indicators and scans have so far protected me from peril.
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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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