Today is ETF Day so I have three ETF "Diamonds in the Rough" for you. It wasn't that difficult to pick today given the majority of ETFs have overbought and topping Price Momentum Oscillators (PMOs). There were some that showed PMOs turning up above the signal line, but the PMOs were too overbought in my opinion.
Utilities (XLU) was on my possibles list, but it is rather extended so upside potential was more limited than I would like. Another theme today was commodities. I had three commodities ETFs land in my scan results. I picked the one that I felt had the most upside potential.
I'm keeping an eye on PFIX, the interest rate ETF, as I believe rates are about to shift higher. I didn't think it was time to present it, but I thought I'd give you a heads up to add it to your watch lists.
Tomorrow is Reader Request Day, so get your symbols in to me via email at email@example.com or you can send a StockCharts ChartList with your requests to firstname.lastname@example.org.
Good Luck & Good Trading!
Today's "Diamonds in the Rough": BDRY, GSG and WCLD.
Runner-ups: DJP, DBA and XLU.
RECORDING LINK 12/9/2022:
Topic: DecisionPoint Diamond Mine (12/9/2022) LIVE Trading Room
Start Time: Dec 9, 2022 09:00 AM PT
REGISTRATION for 12/16/2022:
When: Dec 16, 2022 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (12/16/2022) LIVE Trading Room
Register in advance for this webinar HERE
Here is the last recording:
Welcome to DecisionPoint 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.
Breakwave Dry Bulk Shipping ETF (BDRY)
BDRY tracks an index of long-only exposure to the nearest calendar quarter of dry bulk freight futures contracts on specified indexes. For more information click HERE.
Predefined Scans Triggered: Gap Ups, Moved Above Upper Price Channel and Runaway Gap Ups.
BDRY is down -4.07% in after hours trading so a better entry than today's price is highly likely. This is my favorite chart of the day. It is on the risky side given its low price point so position size wisely. Price has formed a double-bottom in November and it appears to be executing as expected. It technically has reached the minimum upside target of the pattern, but I think we've got more upside to go based on the indicators. The RSI is positive and not yet overbought. The PMO recently moved above the zero line and is not overbought. Stochastics are oscillating above 80 just like we want. The stop is definitely deep, but given today's big rally, it is necessary. You can thin it out if you get in at a lower price. The stop is set at 8.4% around $8.99.
The is a larger double-bottom on the weekly chart. The weekly RSI is rising, though negative. The weekly PMO just triggered an oversold crossover BUY signal. There is a nice positive OBV divergence as well. The upside target is set at the minimum upside target of the double-bottom pattern. I don't know that we'll see an over 45% move, but it should get us at least 15% if not more.
iShares S&P GSCI Commodity-Indexed Trust (GSG)
GSG uses index futures contracts to gain exposure to a production-weighted index of front-month commodities futures contracts. For more information click HERE.
Predefined Scans Triggered: None.
GSG is up +1.24% in after hours trading. This was my favorite PMO of the bunch. It is just starting to rise in oversold territory and is going in for a crossover BUY signal. The RSI is nearly in positive territory and rising. The OBV is confirming this strong rally and Stochastics are rising strongly. Notice that this ETF is beginning to outperform the SPY as well. The stop is set at 5.9% around $19.69.
However, this was my least favorite weekly chart. The weekly RSI is at least on the rise, but it is negative territory. The weekly PMO is in decline on a SELL signal. Even worse is a StockCharts Technical Rank (SCTR) that is in the basement. GSG has some work to do, but the daily chart suggests that in the short term, this should be a good trade.
WisdomTree Cloud Computing Fund (WCLD)
WCLD tracks and index of US companies primarily focused on cloud software and services. Stocks are equal weighted in the index. For more information click HERE.
Predefined Scans Triggered: None.
WCLD is up +0.75% in after hours trading. It was good to see that this ETF still managed a positive close after printing such a big bearish black candlestick. That suggests some internal strength. The RSI is positive. The PMO just moved above the zero line after bullishly bottoming above its signal line. This looks like a rounded bottom which is bullish. We still need to see a breakout. The OBV is confirming the current rally and Stochastics show internal strength as they rise and near 80. This ETF is also outperforming the SPY right now. The stop is set at 5.7% around $25.26.
Despite traveling in a declining trend channel, the weekly PMO was able to bottom and give us a crossover BUY signal. Price is breaking out of the declining trend this week. The weekly RSI is negative, but trending higher. There's no denying the low SCTR is terrible, but it does look like it wants to rise out of very negative territory. Upside potential is listed at resistance at the mid-year high. Even if it only reaches near-term overhead resistance, it would still mean an over 14% gain.
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 10% exposed with a 5% hedge. Depending on market action tomorrow AM, I may add BDRY. It is trading down over 4% after hours, so I'll want to get in on that pullback if it makes sense.
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
(c) Copyright 2022 DecisionPoint.com
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."
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