Last week's winning "diamonds in the rough" came from the Energy and Materials sectors. Those sectors continue to heat it up with the Materials Sector (XLB) having the only positive close on today's decline.
I still like those two sectors, but I left Energy (XLE) out today to focus on Materials (XLB) and Industrials (XLI). I think we'll all agree on the industry group and stocks I have today.
Be aware that one of the Nonferrous Metals stocks I am presenting is very low priced. It does trade with very high volume which is why I was okay including it. Just be sure to position size appropriately to mitigate risk.
Today's "Diamonds in the Rough" are: CP, SCCO and WRN.
Stocks/ETFs to Consider (no order): FOXA, NWS, ATVI, EC, and USAP
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When: May 14, 2021 09:00 AM Pacific Time (US and Canada)
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Date: May 10, 2021 08:59 AM Pacific Time (US and Canada)
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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!
Canadian Pacific Railway (CP)
EARNINGS: 7/21/2021 (AMC)
Provides rail and intermodal transportation services.
CP is unchanged in after hours trading. Railroads have been rallying and outperforming for some time. This one came up on one of my scans today and I couldn't resist showing it on the pullback today. the RSI is coming out of overbought territory on just this one decline which is good. The OBV looks great and the PMO is rising strongly and is not overbought. The SCTR is nearing the hot zone. Another positive is we can set a reasonable 7% stop.
The weekly RSI is positive. The PMO had begun to decline, but it appears it will begin rising again. There is a strong rising trend and price is ready to reach for the top. It's currently trading at an all-time high.
Southern Copper Corp. (SCCO)
Southern Copper Corp. engages in the development, production, and exploration of copper, molybdenum, zinc, and silver. It operates through the following segments: Peruvian Operations; Mexican Open-Pit Operations; and Mexican Underground Mining Operations. The Peruvian Operations segment focuses on the Toquepala and Cuajone mine complexes and the smelting and refining plants, industrial railroad, and port facilities that service both mines. The Mexican Open-Pit Operations segment comprises La Caridad and Buenavista mine complexes, the smelting, and refining plants and support facilities, which service both mines. The Mexican Underground Mining Operations segment involves in the operation of five underground mines, a coal mine, and several industrial processing facilities. The company was founded on December 12, 1952 and is headquartered in Phoenix, AZ.
SCCO is up +0.38% in after hours trading. I covered it on October 21, 2020 in the Diamonds Report. The stop was never hit so the position is up +63.1%. I love everything about this chart except that the RSI is getting overbought. The PMO is NOT overbought and is rising very strongly. Volume is flying in and the SCTR is in the "hot zone" above 75 (top quartile among all mid-caps). It is outperforming the SPX and could be ready to outperform its already hot industry group. Copper is in the news. Chip shortages require copper to fix them so this is likely to be a strong area. The stop is reasonable at 7%, just below the April top.
There is a very large flag-like formation and this week's price action is executing it. The weekly PMO is turning up now and the RSI is positive and not overbought. It is trading at all-time highs.
Western Copper Corp. (WRN)
Western Copper and Gold Corporation is an exploration-stage company. The Company is engaged in exploration and development of the Casino mineral property. The Company's operations are mainly directed towards the acquisition, exploration and future development of resource properties in Canada.
WRN is down 0.60% in after hours trading. I liked this one on the pullback. It is a nice hammer candlestick which implies higher prices tomorrow. The RSI is positive and the PMO is rising and not overbought. While it isn't a big winner amongst its peers, it is outperforming the SPX by a mile. I set the stop at the March top. Remember it is low-priced to tread carefully.
It is now reaching overhead resistance at its 2018 top. The RSI is positive and the weekly PMO is setting up a crossover BUY signal.
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!
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:
The Diamond Index chart looks at the number of scan results from my bullish Diamond PMO Scan and the number of scan results from the inverse Diamond Dog Scan. The Diamond Ratio divides the bullish results by the bearish results.
I only have data going back to October 2019 so I won't make any sweeping conclusions about the Diamond Index chart. I have marked cardinal tops with red dotted vertical lines and cardinal price bottoms with green dotted vertical lines. I believe that when the Diamond Dog results spike, it usually comes at a price bottom, or marks a strong continuation of the rising trend.
Unfortunately, the Diamond PMO Scan result numbers aren't providing much insight. The Diamond Ratio has promise, but again I don't see a clear correlation to the market tops/bottoms right now. I need to study and manipulate the data some more. Keep you posted!
Full Disclosure: I'm about 70% invested and 30% is in 'cash', meaning in money markets and readily available to trade with.
Technical Analysis is a windsock, not a crystal ball.
Watch the latest episode of DecisionPoint with Carl & Erin Swenlin on Mondays 7:00p EST or on the DecisionPoint playlist on the StockCharts TV YouTube channel here!
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!