Today's "Diamonds in the Rough" come from my "Momentum Sleepers" scan. In this scan I speed up the Price Momentum Oscillator (PMO) in comparison to my other scans. There are few other components to the scan, but the idea is to get a jump on stocks that are beginning to show strong momentum under the surface.
Banks were all over this scan so I did include one. I think Banks in general should continue to perform well, but most of the bank stocks I reviewed were stuck in trading ranges or were up against resistance. I picked the one that had broken out and had good technicals. The others are Industrials and one Materials stock.
Cannabis stocks pulled back today, but they all still look very good going forward.
QFIN killed it today, up +20.27%! I'll be watching my position closely and likely changing my hard stop to a trailing stop so I can protect the investment and/or take some profit tomorrow as this breakout propelled the stock close to my upside target.
Today's "Diamonds in the Rough" are: EME, ERII, STL and TRQ.
Stocks/ETFs to Review (no order): CPLG, X, KRA, LEN, KBH, LOB, LGO, PII, RGA and VIPS.
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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!
EMCOR Group, Inc. (EME)
EARNINGS: 8/2/2021 (BMO)
EMCOR Group, Inc. engages in the provision of electrical and mechanical construction and facilities services. It operates through the following segments: Unites States Electrical Construction and Facilities Services; United States Mechanical Construction and Facilities Services; United States Building Services; United States Industrial Services; and United Kingdom Building Services. The Unites States Electrical Construction and Facilities Services segment offers systems for electrical power transmission and distribution. The United States Mechanical Construction and Facilities Services segment involves systems for heating, ventilation, air conditioning, refrigeration, and clean-room process ventilation. The United States Building Services segment consists of those operations which provide a portfolio of services needed to support the operation and maintenance of customers' facilities. The United States Industrial Services segment covers operations which provide industrial maintenance and services. The United Kingdom Building Services comprises of commercial and government site-based operations and maintenance; and facility maintenance and services. The company was founded in 1987 and is headquartered in Norwalk, CT.
EME is unchanged in after hours trading. Nice breakout today. The PMO is rising nicely and hasn't had its crossover BUY signal yet. The OBV is confirming the rally. The SCTR has been strong since March. The group and EME has performed well against the SPX and EME has begun to outperform the Heavy Construction industry group. The stop is set at 8%. The RSI is getting a bit overbought, but it appears it typically moves into the shaded overbought territory before breaking down.
The weekly PMO is overbought, but has been for some time. It shouldn't surprise us given the steep rising trend it has been in since the bear market low. The OBV is confirming the rally. The weekly PMO is overbought, but flat and not declining.
Energy Recovery Inc. (ERII)
EARNINGS: 8/5/2021 (AMC)
Energy Recovery, Inc. engages in the design and manufacture of industrial fluid flow solutions. It operates through the Water, and Oil and Gas segments. The Water segment in sea, brackish, and contaminated water reverse osmosis desalination solutions. The Oil and Gas segment delivers hydraulic fracturing, gas processing, and chemical processing services. Its products include PX Pressure Exchanger, pumping systems, turbochargers, PX PowerTrain, Ultra PX, and VorTeq. The company was founded in April 1992 and is headquartered in San Leandro, CA.
ERII is unchanged in after hours trading. I covered ERII in the February 16th 2021 Diamonds Report. It never hit it stop and is up +27.1%. Granted it has already rallied most of May, but given the set up on this chart, I believe it will continue higher. Price has hit overhead resistance at the early April high, but momentum is building here. The PMO turned up just above the zero line and is headed for a crossover BUY signal. The RSI has just moved into positive territory and the SCTR has spent most of the past six months in the "hot zone" above 75, meaning it is in the upper quartile of all small-cap stocks.
Price bounced off strong support at the 2016 top. The weekly RSI is positive. The weekly PMO did just give us a crossover SELL signal, but it appears to be flattening.
Sterling Bancorp (STL)
EARNINGS: 7/21/2021 (BMO)
Sterling Bancorp operates as a financial and bank holding company of Sterling National Bank, which engages in the provision of commercial, business, and consumer banking products and services through its subsidiary. The company was founded in 1888 and is headquartered in Pearl River, NY.
STL is unchanged in after hours trading. Besides being in a strong industry group, STL broke out from a consolidation zone. The RSI is positive and the PMO is rising toward a new crossover BUY signal. Both the PMO and OBV's rising trends are confirming this breakout move. The SCTR has been in the "hot zone" above 75 since December of last year. In the thumbnail you can see that in the very short term it is spiking in outperformance. In the intermediate term, performance is in a rising trend. The stop is set at support just under $25.
The weekly RSI is extremely overbought. I'm surprised that the consolidation last month didn't bring it down. The weekly PMO is flat, but also extremely overbought. This is a similar picture on many of the bank stocks. More than likely they will stall in the intermediate term, but for now, there are strong short-term technicals.
Turquoise Hill Resources Ltd. (TRQ)
EARNINGS: 7/28/2021 (AMC)
Turquoise Hill Resources Ltd. engages in the exploration and development of mineral properties. It focuses on Oyu Tolgoi Copper-Gold Mine. The company was founded by Robert Martin Friedland on January 25, 1994 and is headquartered in Montreal, Canada.
TRQ is up +0.16% in after hours trading. I may have to pick this one up as I really do like the chart. The one reason I may not is that I already have a portfolio that is somewhat heavy on the Materials side. The keyword in the company description is "copper". This stock was killed last month after earnings, but it is coming back. There is a short-term double-bottom that has executed on today's breakout. The minimum upside target would take it to overhead resistance at about $20. The RSI has just hit positive territory again and the PMO has turned up and is rising toward a crossover BUY signal. The SCTR is strong. I wish that OBV bottoms were rising, not falling, but volume does appear to be coming in. In the very short term it has begun to outperform the SPX. I suspect we will see it improve against its group soon. The stop is set below the second bottom of the double-bottom pattern.
The weekly RSI looks fantastic. It's currently positive and not overbought. The PMO has given us a crossover SELL signal on the big decline, but we've seen prior weekly PMO signal line tests and the stock has prevailed. If it can get to the 2017 low, that is a 33%+ gain.
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.
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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