Welcome to ETF Wednesday! Before I get started, I saw that Friday is a holiday this week. These holidays always sneak up on me. I've decided that the schedule will remain the same as always with Friday being the Diamond Mine trading room (1 hour instead of 1 1/2 hours since there is no active trading that day) and distribution of the DP Diamonds Recap. The Recap will be published Friday after we finish the trading room. Then we can all get on with enjoying a rare market holiday.
Defensive groups were the clear winners today and with the market pausing the rally, I decided we should go with it. Healthcare (XLV) had the best looking ETFs. Do pay attention to other defensive groups like Utilities (XLU) and Consumer Staples. XLV and XLU are listed as runner-ups and are ripe if you like to invest in the SPDRs. I chose Health Services ETF (XHS) and Medical Devices ETF (IHI).
The final ETF for the day is set up to take advantage of the newfound strength in Energy, particularly Oil. I have the US Oil & Gas Exploration & Production ETF (IEO).
Prepare for some pullback on your positions as the market cools. Short-term traders might consider paring exposure to wait out the market pullback or adding a hedge. Defensive sectors should hold up through a short market decline.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": IEO, IHI and XHS.
Runner-ups: TSLQ, XLV, XLU and IYZ.
RECORDING LINK (3/31/2023):
Topic: DecisionPoint Diamond Mine (3/31/2023) LIVE Trading Room
Passcode: March#31
REGISTRATION for 4/7/2023:
When: Apr 7, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (4/7/2023) LIVE Trading Room
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Here is the last recording (4/3):
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.
iShares U.S. Oil & Gas Exploration & Production ETF (IEO)
EARNINGS: N/A
IEO tracks a market cap weighted index of companies in the U.S. oil and gas exploration and production space according to Dow Jones. Click HERE for more information.
Predefined Scans Triggered: None.
IEO is up +0.35% in after hours trading. This one should take advantage of new strength in Crude Oil. We are coming in a little late on the rally, but the recent pause above the 50/200-day EMAs suggests it will get going again. The indicators are on board for that conclusion. The RSI is positive and rising. The PMO is on an oversold BUY signal and is rising toward the zero line. Stochastics are above 80 and volume is confirming the rally based on the OBV. Relative strength is steadily increasing. The stop is set below support at 6.3% or $83.44.
The declining trend hasn't been erased yet on the weekly chart, but this rally is only getting started. The weekly RSI just moved into positive territory and the weekly PMO is turning up. I would like to see the StockCharts Technical Rank (SCTR) higher, but as I said, I think the rally is only starting. Upside potential is about 17%.
*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.
iShares U.S. Medical Devices ETF (IHI)
EARNINGS: N/A
IHI tracks a market-cap-weighted index of manufacturers and distributors of medical devices in the US. Click HERE for more information.
Predefined Scans Triggered: None.
IHI is down -1.94% in after hours trading. It will allow for a better entry if it opens lower. However, I would reconsider adding this one if it drops below $53. The indicators are healthy enough to expect more upside. The RSI is positive and the PMO is rising after reaching above the zero line. The OBV is confirming the rising trend and Stochastics are above 80 and moving sideways, not down. Relative strength has been so-so, but it does appear to be picking up strength now. The 20-day EMA just recently crossed above the 50-day EMA (a "Silver Cross") which generated an IT Trend Model "Silver Cross" BUY Signal. The stop is set below support at 7.1% or $50.42.
We have a bullish reverse head and shoulders on the weekly chart. It hasn't quite been confirmed as we need a breakout here. I believe it will breakout given the weekly RSI is rising in positive territory and isn't overbought. I particularly like the weekly PMO turning up above its signal line. We consider that especially bullish. The SCTR just moved into the "hot zone". This could be considered a more intermediate-term investment. If the head and shoulders is confirmed, the minimum upside target would take price above the April top. I'm looking for a move that would be higher than that.
SPDR S&P Health Care Services ETF (XHS)
EARNINGS: N/A
XHS tracks an equal-weighted index of US health care services companies, as defined by GICS. Click HERE for more information.
Predefined Scans Triggered: None.
XHS doesn't appear to trade after hours. This is definitely a low volume ETF, but given it is a SPDR I felt we could use it. Today saw a nice bullish engulfing candlestick and a breakout above the 50-day EMA. The RSI just moved into positive territory and is rising. The PMO has had a positive crossover in oversold territory. Stochastics are well above 80. This one hasn't been performing well based on relative strength, but we are seeing a breakaway from that relative declining trend. The stop can be set around 6.3% or $82.51.
The weekly chart is beginning to take shape. The weekly RSI is rising and almost above net neutral (50). The weekly PMO is approaching a crossover BUY signal. The SCTR needs work. I would consider this trade to be short-term until that SCTR improves.
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 26% long, 2% short.
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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Watch the latest episode of DecisionPoint Trading Room 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