The Diamond PMO Scan again only produced two results--both were the same as yesterday's results. Neither looks enticing, but I'll reveal them further down and let you decide. The Diamond Dog Scan produced 78 results today versus 87 yesterday. In a bear market, we have very little choice but to continue to present shorting opportunities.
There were two clear themes in today's scans. First, Banks were well represented in the "Dog" results. The second group, which I picked today's shorts from, is Home Builders. Rising rates have not been helping bank stocks and the exponential rise in mortgage rates has pushed Home Builders lower. Today, many of them broke major support levels. You know you have a good short when you have to go to the weekly chart to find support levels.
The declines in both of these groups were very large so we could see a bit of a dead cat bounce on these stocks. That will offer us an even better entry if indicators remain negative.
The two Diamond PMO Scan results were CI and MCK. I don't like them.
What I look for in a short position:
I consider a stock a shorting opportunity if strong support has been broken in the short term and price is far away from the next support level on a weekly chart. I want bearish chart patterns if possible. I want to see volume flying out of the stock/ETF.
Momentum must be negative (PMO pointing downward) and on a SELL signal or close to triggering one. RSI and Stochastics should be below net neutral (50). Relative strength should be equal (if SPY is in a bear market configuration) or worse than the benchmark SPY.
Remember that on the daily chart I'm giving you a "stop" level that is higher than today's current price. We are shorting, so we need to determine how far we will let it rally before covering the short.
On the weekly chart the "targets" are downside targets, not upside targets.
Good Luck & Good Trading,
Today's "Diamonds in the Rough": DHI (Short), HOV (Short) and SKY (Short).
Stocks to Review (ALL are SHORTS): C, CCS, FBHS, TOL, TPH and VICR.
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Welcome to DecisionPoint Daily Diamonds, wherein I highlight ten "Diamonds in the Rough" per week. 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!
"Predefined Scans Triggered" are taken from StockCharts.com using the "Symbol Summary" option instead of a "SharpChart" on the workbench.
DR Horton Inc. (DHI)
EARNINGS: 7/21/2022 (BMO)
D.R. Horton, Inc. engages in the construction and sale of single-family housing. It operates through the following segments: Homebuilding, Forestar, Financial Services, and Rental. The Homebuilding segment includes the acquisition and development of land and the construction and sale of residential homes. The Forestar segment invests in land acquisition and development to expand its business across the United States. The Financial Services segment sells mortgages and collects fees for title insurance agency and closing services. The Rental segment consists of multi-family and single-family rental operations. The company was founded by Donald Ray Horton in 1978 and is headquartered in Arlington, TX.
Predefined Scans Triggered: Moved Below Lower Bollinger Band, Moved Below Lower Price Channel, P&F Triple Bottom Breakdown, New 52-week Lows and P&F Double Bottom Breakout.
DHI is down -1.11% in after hours trading. I've covered it twice before on January 19th 2021 (Timing was near perfect, position is technically open but the stop level is about to be hit. It was up over 56% at its top) and July 21st 2021 (position stopped out early). Important support on the daily chart was lost on heavy volume today. Price had been in a trading range. The RSI is negative, falling and not oversold yet. The PMO just triggered a crossover SELL signal. Stochastics are negative and falling. The group has been performing a bit better than the SPY (hence the trading range), but is taking a turn back down. If we're going to short in this group, this one has one of the worst relative strength lines against the group that I found. The upside target was tough because it was down almost 5% today. I'd set it above the 20-day EMA at a minimum.
Admittedly it hasn't actually broken below the strongest level of support at the early 2020 top, but it is on its way. The weekly RSI is negative and the weekly PMO is still pointed down. If it breaks down, the next level of support would be the 2018 top. That is over 21% away.
Hovnanian Enterprises, Inc. (HOV)
EARNINGS: 6/2/2022 (BMO)
Hovnanian Enterprises, Inc. is a homebuilding company, which engages in the design, construction, and marketing of single-family attached town homes and condominiums, urban infill, and planned residential developments. It operates through the following segments: Homebuilding, Financial Services, and Corporate. The Homebuilding segment consists of the following geographical segments: Northeast, Mid-Atlantic, Midwest, Southeast, Southwest, and West. The Financial Services segment offers mortgage loans and title services to the customers of homebuilding operations. The Corporate segment refers to the executive offices, information services, human resources, corporate accounting, training, treasury, process redesign, internal audit, construction services, and administration of insurance. The company was founded by Kevork S. Hovnanian in 1959 and is headquartered in Matawan, NJ.
Predefined Scans Triggered: Moved Below Lower Bollinger Band, P&F Triple Bottom Breakdown, New 52-week Lows, P&F Double Bottom Breakout and Moved Below Lower Keltner Channel.
HOV is unchanged in after hours trading. I've covered HOV twice. January 19th 2021 (Position about to hit stop, was up over 290% at the top!) and December 1st 2021 (stop has been triggered, but was up 34% at the top). Major support was lost today on the daily chart. The RSI is now in oversold territory, but notice in April it spent most of its time there. The PMO has topped well below the zero line and should trigger a crossover SELL signal soon. Stochastics are in the basement and still dropping. Volume has been flying out of this one. This is another with terrible relative strength against the group and SPY. This was another stock that was hard to set a stop on. You'll want it to be above the support level that was broken today.
The weekly RSI is now oversold, but it can stay that way in a bear market. The weekly PMO is falling well below zero and is not oversold. If it tests the next level of support, that is over 24% away.
Skyline Corp. (SKY)
EARNINGS: 5/23/2022 (AMC)
Skyline Champion Corp. engages in the manufacture and retail of mobile homes and other manufactured housing. It builds homes under the following brands: Skyline Homes, Champion Home Builders, Athens Park Model RVs, Dutch Housing, Excel Homes, Homes of Merit, New Era, Redman Homes, Shore Park, Silvercrest, Titan Homes in the U.S. and Moduline and SRI Homes in western Canada. The company was founded on June 1, 2018 and is headquartered in Troy, MI.
Predefined Scans Triggered: New CCI Sell Signals and P&F High Pole.
ZIM is down -0.59% in after hours trading. I covered ZIM on January 12th 2022. This was a heartbreaker. It pulled back immediately to the 50day EMA and triggered the stop, but then bounced and didn't stop until it was up 55%. Of course, it slid back down in April.
SKY is unchanged in after hours trading. It too broke important support on the daily chart after a failed breakout. The PMO has topped well beneath the zero line. The RSI is negative and falling. Stochastics are negative and falling too. This one is also performing poorly against the group and SPY. The stop is set a little over halfway through the prior trading range and above the 20-day EMA.
It is currently holding support on the weekly chart, but I am looking for price to test the 2020 high which is over 23% away. The weekly RSI is negative and the weekly PMO is about to dip below the zero line.
Don't forget, on Thursdays I look at reader-requested symbols, click HERE to shoot me an email. 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)
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:
Full Disclosure: I'm 20% invested, 15% are bearish positions.
I'm required to disclose if I currently own a stock and/or may buy/short it within the next 72 hours.
"Technical Analysis is a windsock, not a crystal ball." - Carl Swenlin
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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)
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