On Fridays I give you a "Sector to Watch" and an "Industry Group to Watch" for the following week. They don't always work out to be the best, but usually they do perform and finish higher. This week the "Sector to Watch" is turning out to be a good selection as today we saw a breakout.
The sector is Materials (XLB). Today I'm presenting an ETF that follows Materials, but has a slightly different strategy. It performed much better than XLB today so it could be an interesting way to take advantage of this group's strength.
In accordance with this theme, I have put the Steel ETF (SLX) on today's list. The last one is Copper Miners ETF (COPX). I'm seeing some positive movement in Gold Miners (GDX) and Miners & Metals (XME).
Do take a look at the Runner-ups if you have time. I scoured my ETF lists and again found that the vast majority of them have declining PMOs with the exception of inverse index ETFs and those I have listed as runner-ups.
Good Luck & Good Trading,
Today's "Diamonds in the Rough": COPX, FXZ and SLX.
Runner-ups: PDBC, PAVE, TAN, TMV, TYO and XLB.
(Update: Yesterday's YOU nearly hit its stop today on earnings. There is a big bearish engulfing candlestick. It's currently up +1.36% in after hours trading. Be careful.)
RECORDING LINK (2/24/2023):
Topic: DecisionPoint Diamond Mine (2/24/2023) LIVE Trading Room
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When: Mar 3, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (3/3/2023) LIVE Trading Room
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Here is the last recording (2/27):
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.
Stop levels are all rounded down.
Global X Copper Miners ETF (COPX)
COPX tracks a market-cap-weighted index of global copper mining companies. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Green, Moved Above Ichimoku Cloud and Parabolic SAR Buy Signals.
COPX is down -0.13% in after hours trading. Price gapped up and out of a declining trend channel. I think the gap is a breakaway gap which means we should see a nice rally continuation. We also have a positive OBV divergence between price bottoms and OBV bottoms. The OBV bottoms are angling slight downward, but compared to price lows it is mostly flat. The RSI just moved into positive territory and Stochastics are above 50 and rising vertically. The PMO has just barely turned up so we are early on a probable move higher. Relative strength is improving quickly. The stop is set below support at 7.7% around $36.53.
The weekly chart was breaking down, but it has reversed, causing the weekly PMO to bottom above its signal line. The weekly RSI has stayed in positive territory. The SCTR is excellent and well within the hot zone* above 70%. Upside potential should it reach resistance is about 16%.
*We call it the "hot zone" because it implies that the stock/ETF is in the top 30% of its "universe" (large-, mid-, small-caps and ETFs) as far as trend and condition, particularly in the intermediate and long terms.
First Trust Materials AlphaDEX Fund (FXZ)
FXZ tracks a tiered, equal-weighted index of large- and mid-cap basic materials firms in the US. Holdings are selected and weighted based on growth and value metrics. Click HERE for more information.
Predefined Scans Triggered: None.
FXZ is unchanged in after hours trading. This is an alternative to XLB, the weightings are determined by the fund manager. You'll note on FXZ and the XLB chart (not shown) that price has broken from a short-term declining trend. It's early for the PMO, but it is attempting to turn back up. I was okay with this mainly because the other indicators are strongly bullish. The RSI is positive, rising and not overbought. There is a very strong positive divergence between price lows and OBV lows. Finally, Stochastics are rising strongly in positive territory. The stop is set below support at 7.1% around $64.96.
The weekly chart is very good. The weekly RSI is positive and not overbought. The weekly PMO has bottomed above the signal line. The SCTR is incredibly strong and getting stronger. It is near all-time highs, so consider an upside target of about 15%.
VanEck Vectors Steel ETF (SLX)
SLX tracks a market-cap-weighted index of global steel firms. Click HERE for more information.
Predefined Scans Triggered: Elder Bar Turned Green, New CCI Buy Signals and Parabolic SAR Buy Signals.
SLX is down -0.62% in after hours trading. Today looks like a continuation or runaway gap following Monday's breakaway gap. The frustrating thing about gaps is that we don't really know what kind they are until we see follow-through. It could be a set up for a reverse island (gap down that leaves price as an "island"). I don't believe so given Monday's gap. The RSI is rising, positive and not overbought. The PMO has just turned up. Stochastics are rising in positive territory. Relative strength has been consistently good for months. The stop is set below support at 7% or around $63.39.
The weekly chart shows SLX breaking to new all-time highs this month. The weekly RSI is positive and the weekly PMO is accelerating higher. The SCTR is outstanding at 99.6%. Since it is at all-time highs, consider an upside target of 15% around $78.39.
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 22% 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
(c) Copyright 2023 DecisionPoint.com
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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