The ETF universe is very small in comparison to stocks, so ETFs are typically absent from my scan results. This is why I've opted to do "ETF Day" on Wednesdays. I scour that ETF universe in search of ETFs that fit my investment profile. I look at the Industry Summary on StockCharts.com and review our sector charts and the charts in our ETF Tracker (email me if you'd like a copy).
I only found four I liked and one of them I decided to tell you about in the intro rather than do the chart. Today's runner-up is SOXS, the 3x bearish ETF for Semiconductors. I'm not a fan of leveraged ETFs like this, so I would probably choose to short one of the bullish Semiconductor funds. Take a peek at SOXX (Semiconductor Bull Fund ETF - not leveraged). We have a double-top forming on SOXX that looks ominous enough for me to consider shorting this group.
Here's what I came up with today:
The Alternative Harvest ETF (MJ) is volatile for an ETF, but I've been stalking this chart for some time. Just understand that the volatility requires a strong stomach.
The Interest Rate Hedge ETF (PFIX) is back in the spotlight as yields begin to bottom again.
Finally, I am including the SPDR Consumer Staples ETF (XLP). I'm feeling more bearish about the market right now and XLP is a defensive sector.
Hope you like "ETF Day" and today's "Diamonds in the Rough".
Good Luck & Good Trading!
Today's "Diamonds in the Rough": MJ, PFIX and XLP.
"Runner-up": SOXS and SSG (low average daily volume).
RECORDING LINK (8/12/2022):
Topic: DecisionPoint Diamond Mine (8/12/2022) LIVE Trading Room
Start Time: Aug 12, 2022 08:59 AM
Meeting Recording Link
Access Passcode: August#12
REGISTRATION FOR Friday 8/19 Diamond Mine:
When: Aug 19, 2022 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (8/19/2022) LIVE Trading Room
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Unfortunately there is no recording for yesterday's DecisionPoint Trading Room so here is a copy of the one we did 2 weeks ago:
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.
ETFMG Alternative Harvest ETF (MJ)
MJ tracks a market-cap-weighted index of global firms engaged in the legal cultivation, production, marketing or distribution of cannabis, cannabinoids or tobacco products.
Predefined Scans Triggered: P&F Descending Triple Bottom Breakdown, Elder Bar Turned Blue and P&F Double Bottom Breakout.
MJ is down -0.78% in after hours trading. We have a constructive cup-shaped basing pattern. I admit that I'm not a fan of the filled black candlestick yesterday right on resistance and today's rough decline. It was originally up in after hours trading by +0.78%. This is what I meant regarding volatility in the opening. Antacid should be nearby. Still, I like what's happening. There was a strong intermediate-term positive OBV divergence leading into this rally. The RSI is positive and the PMO just hit positive territory. Stochastics did turn down on today's decline, but remains above 80. It has been performing similarly to the market which is acceptable. If we do see a decline, that would set up a bullish cup with handle. This is probably more watch list material right now, but I'm stalking it for my portfolio. The stop is near my average 8% level around $5.86. This is a low-priced ETF so position size wisely -- I know I will be if I pull the trigger.
The weekly chart looks very good. The weekly RSI is rising out of the basement and the OBV is confirming this rising trend. The weekly PMO is in the process of generating an IT BUY signal. I was concerned at first when I saw it failed the last time the weekly PMO had a crossover, but notice there was an OBV negative divergence before the signal failed. The SCTR is in the basement right now, but it is incredibly beat down. Upside potential is crazy if we get a breakout, but I'm going in conservatively with an upside target of about 28% or $8.20.
Simplify Interest Rate Hedge ETF (PFIX)
EARNINGS: 11/9/2022 (AMC)
PFIX is actively managed to provide a hedge against a sharp increase in long-term interest rates. The fund holds OTC interest rate options, US Treasurys, and US Treasury Inflation-Protected Securities (TIPS). For more information, click here.
Predefined Scans Triggered: Elder Bar Turned Green.
PFIX is down -0.12% in after hours trading. It appears to me that interest rates are about to rise in a big way based on the technicals of the yield charts and particularly the 10-year Treasury Yield. Price has been consolidating, but the indicators are starting to show promise. The RSI is still negative, but rising somewhat. The PMO is what impressed me. It generated a crossover BUY signal today. The OBV is confirming the mild rising trend and Stochastics are rising toward positive territory. The stop is set at 7.3% or around $47.43.
We don't have much data on the weekly chart for this new-ish ETF, but we do note a rising weekly RSI and huge improvement on the SCTR. The weekly PMO is still getting its legs so I don't want to make any sweeping conclusions regarding its current condition. Upside potential is over 26%, although I'm not sure we'll see those levels. I'd be happy with an upside gain of about 15%.
Consumer Staples Select Sector SPDR Fund (XLP)
XLP tracks a market-cap-weighted index of consumer-staples stocks drawn from the S&P 500.
Predefined Scans Triggered: Hollow Red Candles and P&F Double Top Breakout.
XLP is unchanged in after hours trading. The market is making me edgy. ST indicators topped and the ultra-short-term indicators generated a downside initiation climax today. When I get nervous about the market, I consider defensive sectors, industries and stocks.
We see that price did top right on resistance at the January high, but looking "under the hood" we see bullish characteristics. The PMO is rising after bottoming above its signal line. The RSI is positive and not quite overbought. The Silver Cross Index and Golden Cross Index have strong bullish readings above 70%. Participation of stocks above their 20/50/200-day EMAs are strong. Yes, they are overbought, but with participation, overbought readings can remain in place for weeks. Stochastics topped but are well above 80. Relative strength isn't great when you compare it to the SPY, but as I said I expect that to change if the market gets too soft. The stop is set at 7.4% around $71.29.
The weekly chart is excellent all the way around. The weekly RSI is rising strongly in positive territory. The weekly PMO is generating a crossover BUY signal. The OBV showed a positive divergence with price bottoms that led into this rally. The SCTR is excellent. It is very close to all-time highs, so consider an upside target around 15%.
Don't forget, on Thursdays I look at reader-requested symbols, click HERE to send 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 am 60% exposed. Contemplating MJ and a short on Semiconductors.
I'm required to disclose if I currently own a stock I mention 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."
Regarding BUY/SELL Signals: The signal status reported herein is based upon mechanical trading model signals and crossovers. They define the implied bias of the price index/stock based upon moving average relationships and momentum, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
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