It was honestly pretty easy to find three ETF "Diamonds in the Rough" today. Almost every industry group displays declining overbought Price Momentum Oscillators (PMOs). Therefore determining a theme today wasn't difficult. Only a select few had rising momentum.
There were two overarching themes among ETF "Diamonds in the Rough" and they shouldn't surprise you. First, and very much not surprising are the ETFs from the Energy sector. All of these ETFs are looking very promising. I included two, but you'll find more in the "Runners-up" list.
The other theme was agriculture. Besides the one I'm presenting, there are two others that look promising. I decided to go with the Wheat Fund (WEAT) mainly for its amazing upside potential; but, it is definitely the more risky of the three I'm presenting today.
I really liked the Uranium chart, but it was up over 11% today so I didn't believe it was ripe because it could see some profit taking on today's big move which would lead to a decline. Once it takes back a few of today's gains, I would consider it for my portfolio.
Good Luck & Good Trading!
Today's "Diamonds in the Rough": IEO, WEAT and XES.
"Runners-up": DBA, GSG, XLE, IGE, BNO, MOO and URA.
RECORDING LINK (8/19/2022):
Topic: DecisionPoint Diamond Mine (8/19/2022) LIVE Trading Room
Start Time: Aug 19, 2022 09:00 AM PT
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Last Monday's Recording:
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.
iShares U.S. Oil & Gas Exploration & Production ETF (IEO)
IEO tracks a market cap weighted index of companies in the U.S. oil and gas exploration and production space according to Dow Jones.
Predefined Scans Triggered: P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
IEO is down -0.58% in after hours trading. I've covered it numerous times. I'll link to the last article from March 21st 2022 which has the links for the prior times I've covered it. It's been three years since we started this so it is getting a bit unwieldy to list every time I've previously covered it. ETFs are going to repeat given the universe of choices is smaller.
IEO confirmed a reverse head and shoulders earlier this month. I apologize this one didn't hit my radar sooner. The PMO is on an oversold BUY signal and it isn't quite to overbought territory yet. The RSI did hit overbought territory, but I expect that will persist given the technicals are so good. Volume is coming in strong and Stochastics have taken up residence above 80. Relative strength is building. The stop is set below support, right around 7.7% or $87.92.
Based on the weekly chart this one should overcome resistance at this year's high. The weekly PMO is rising toward a BUY signal. The weekly RSI is positive and the SCTR is about as good as it gets at 99.5%. While it is only 12.5% from all-time highs, I would set upside potential at 16% or $110.50.
Teucrium Wheat Fund (WEAT)
WEAT tracks an index of wheat futures contracts. It reflects the performance of wheat by holding Chicago Board of Trade wheat futures contracts with three different expiration dates. For more information click here.
Predefined Scans Triggered: Filled Black Candles and P&F Double Bottom Breakout.
WEAT is up +0.24% in after hours trading. I've covered it before, here is the link to the last time on May 12th 2022. This is the more risky of the choices today, but I just couldn't pass up the upside potential. If I caught IEO late, I'm catching this one early. WEAT has been suffering after the mania of wartime shortages. There is a bullish falling wedge. Price hasn't actually broken out to confirm the pattern and it formed a bearish black filled candlestick yesterday and today. Price closed above the 20-day EMA so it doesn't bother me right now. The RSI is almost in positive territory. The PMO has bottomed above its signal line which is especially bullish. Stochastics are rising strongly in positive territory. Relative strength, not surprisingly, has been terrible, but this week has broken out of its declining trend. The OBV is mediocre, but is reversing higher. I've set the stop below the August low, but you could definitely tighten it up if you want. The stop is 8.1% or around $7.65.
The weekly chart isn't very bullish and that is why I would call this risky. Price is rebounding off support at 2018 and 2021 highs. The weekly RSI is in negative territory but in a rising trend. The weekly PMO is still declining with little deceleration. The war certainly added immense volatility to this ETF. Given the long and deep decline, the SCTR isn't healthy, reading at 34.2%.
SPDR S&P Oil & Gas Equipment & Services ETF (XES)
XES tracks an equal-weighted index of companies in the oil & gas equipment and services sub-industry of the S&P Total Market Index.
Predefined Scans Triggered: Moved Above Upper Bollinger Band, Moved Above Ichimoku Cloud, P&F Double Top Breakout, P&F Triple Top Breakout and P&F Quadruple Top Breakout.
XES is down -2.20% in after hours trading. That would still keep price above support. I covered XES numerous times, here is the link to the last time on May 18th 2022. A bullish ascending triangle has been confirmed with today's breakout. The RSI is positive and rising. The PMO just hit positive territory after an oversold crossover BUY signal. Stochastics are now above 80 and relative strength has kicked in. The stop is set below the EMAs and where we could see a breakdown at 6.5% or $62.16.
The weekly RSI just hit positive territory. Notice that price rebounded before testing long-term support. This is very bullish. The weekly PMO is flat but technically rising. The SCTR is outstanding at 96.2%. I've marked upside potential at 28%, but it could be much more if we get a breakout there.
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 opted to stay at 45% exposed.
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.
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