Last Friday I wrote that the sector and industry groups to watch were the Communications Services (XLC) sector and the Internet and Mobile Telecom industry groups. Internet certainly performed well; it is currently up 7.39% this week. Mobile Telecom is up a modest 0.85%. I decided to focus in on a few Internet stocks that appear to have some room to run. I'm quite pleased with yesterday's Diamonds, in particular ServiceNow (NOW) and the Cloud Computing ETF (SKYY) which were up 6.5% and 3.39% respectively. I wish they all worked that way! I did enter SKYY and MSFT today.
I had a reader ask me what is the best way to prepare for a 'price shock' should the market turn quickly on us. I know how I do it...stops. They can be so annoying when they trigger especially when you see price turn back up right away, but it is really (in my opinion) the best way to protect yourself. I've been letting readers know that I have most of my positions on trailing stops. I want to take advantage of growth to the upside, but bring my stop up with me to protect those profits. The depth of that stop is an individual preference. I'll talk more about how I set stops in the Diamond Mine trading room Friday, but in the meantime you can watch a video I did about a year and half ago that gives you some of my strategies.
FRIDAY (8/28) at Noon EST for this week's "DecisionPoint Diamond Mine" trading room!
"The DecisionPoint Diamond Mine" will be an opportunity for us to talk live, review current and past Diamonds for possible entries/exits/stops/targets and take your questions and symbol requests in this intimate trading room.
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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!
Baidu Inc (BIDU) - Earnings: 11/5/2020 (AMC)
Baidu, Inc. engages in the provision of internet search and online marketing solutions. The firm's products and services include Baidu App, Baidu Search, Baidu Feed, Haokan, Quanmin, Baidu Post Bar, Baidu Knows, Baidu Encyclopedia, Baidu Input Method Editor or Baidu IME and Overseas Products. It operates through the following segments: Baidu Core and iQIYI. The Baidu Core segment offers keyword-based marketing services. The iQiyi segment provides online advertising services.
Up 0.40% in after hours trading, BIDU has been moving mostly sideways since mid-July in about a 10% price range. I believe it is now time for it to breakout. It certainly isn't a sure thing given there was a head fake earlier in the month where the PMO was just about ready to give a crossover BUY signal, the RSI had turned positive. However, this time, the SCTR and RSI are rising. Note the increase in volume coming in too. Normally I wouldn't give a stock such a deep stop, as a drop below the 200-EMA is generally sufficient for me to let go of stock. However, in this case, we saw two different pullbacks that took price below the 200-EMA and price turned around. This has set up a strong support level that is below the 200-EMA.
The weekly PMO is very positive. I noticed on the weekly chart that a double-bottom is forming. For now my upside target (or at least 'review' target) is at the confirmation line for the pattern. If it breaks above that, the pattern would call for a move right up to important resistance at the 2018 bottoms.
Walt Disney Co (DIS) - Earnings: 11/5/2020 (AMC)
The Walt Disney Co. is a diversified international family entertainment and media enterprise. It operates through the following segments: Media Networks, Parks, Experiences and Products, Studio Entertainment and Direct-to-Consumer and International (DTCI). The Media Networks segment includes cable and broadcast television networks, television production and distribution operations, domestic television stations, radio networks and stations. The Parks, Experiences and Products segment owns and operates the Walt Disney World Resort in Florida; the Disneyland Resort in California; Aulani, a Disney Resort & Spa in Hawaii; the Disney Vacation Club; the Disney Cruise Line; and Adventures by Disney. The Studio Entertainment segment produces and acquires live-action and animated motion pictures, direct-to-video content, musical recordings and live stage plays. This segment distributes films primarily under the Walt Disney Pictures, Pixar, Marvel, Lucasfilm and Touchstone banners. The DTCI segment licenses the company's trade names, characters and visual and literary properties to various manufacturers, game developers, publishers and retailers throughout the world. It also develops and publishes games, primarily for mobile platforms, and books, magazines and comic books. This segment also distributes branded merchandise directly through retail, online and wholesale businesses.
Disney (DIS) was a previous Diamond on 5/7. This is in the Comm Services sector, but in the entertainment industry. However, Disney streaming now puts them partly in the category of the 'internet' industry. This week we are seeing a breakout from a short-term declining trend. The next test is at the August top. The PMO has bottomed above its signal line which I always find especially bullish. Disney is now making a move toward gap resistance. The major indexes were able to push past that level; we'll see if DIS can follow suit. The RSI is positive and rising and the SCTR is respectable, though not in the "hot zone". If I had to complain, it would be the OBV which didn't push past its previous top or even get close. It's forgivable.
It's a 15.5% upside target, but it will need to get past that gap resistance area. The weekly PMO certainly suggests we will reach that level.
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!
KraneShares CSI China Internet ETF (KWEB) - Earnings: N/A
KWEB tracks a foreign equity index composed of overseas-listed Chinese Internet companies.
Up 0.97% in after hours trading, KWEB has formed a bullish ascending triangle and is poised to breakout. The pattern suggests a breakout and move to around $79. The PMO has bottomed above the zero line, the RSI is rising and the SCTR is exceptional. Volume is coming in on this current price rise. This one also had a head fake in early August. The PMO was rising and nearing a breakout, but the RSI had hit overbought territory. We will see if the breakout occurs this time, but the pattern certainly suggests it will.
The PMO is rising bullishly. It doesn't have enough data to really tell us if it is overbought, but it is at the top of the current range.
Marvell Technology Ltd (MRVL) - Earnings: 8/27/2020 (AMC)
Marvell Technology Group Ltd. engages in the design, development, and sale of integrated circuits. The company offers System-on-a-Chip devices, which leverages technology portfolio of intellectual property in the areas of analog, mixed-signal, digital signal processing, and embedded and standalone integrated circuits. It also develops integrated hardware platforms along with software that incorporates digital computing technologies designed and configured to provide an optimized computing solution. The company was founded by Sehat Sutardja, Weili Dai and Pantas Sutardja in January 1995 and is headquartered in Hamilton, Bermuda.
Down 0.03% in after hours trading, MRVL was a Diamond on 3/11. The PMO and RSI just hit positive territory. Volume is coming in, although pulled back a bit the last few days. The caution would be that price is still technically in a declining trend channel and could be turned away before breaking out.
The weekly PMO doesn't look that great, but it is beginning to turn back up. Might be best to keep this one on a tight leash.
Tencent Holdings Ltd (TCEHY) - Earnings: 11/11/2020
Tencent Holdings Ltd. is an investment holding company. It operates through the following segments: Value-Added Services, FinTech and Business Services, Online Advertising, and Others. The Value-added Services segment involves online and mobile games, community value-added services, and applications across various Internet and mobile platforms. The FinTech and Business Services segment provides fintech and cloud services, which include commissions from payment, wealth management and other services. The Online Advertising segment represents display based and performance based advertisements. The Other segment consists of trademark licensing, software development services, software sales, and other services. The company was founded by Yi Dan Chen, Hua Teng Ma, Chen Ye Xu, Li Qing Zeng, and Zhi Dong Zhang on November 11, 1998 and is headquartered in Shenzhen, China.
TCEHY was a Diamond on 5/29. The PMO is about to give us a BUY signal and the RSI is positive, not overbought. Volume is coming in. I set the stop level at about 7% to line up with those July bottoms.
The weekly PMO is rising again and is not overbought.
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)
- The Bullish Percent Index (BPI) shows the percentage of SPX stocks on Point & Figure BUY signals.
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 is the current chart:
- Diamond Scan Results: 11
- Diamond Dog Scan Results: 5
- Diamond Bull/Bear Ratio: 2.20
Full Disclosure: I'm about 70% invested right now and 30% is in 'cash', meaning in money markets and readily available to trade with. I added MSFT and SKYY from yesterday's Diamonds, as well as TDOC from last week's Diamonds. Please...just because I buy it, it doesn't mean that they are better than any of the other Diamonds...I simply cannot purchase them all so I have to choose just like you do!
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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