The market paused the decline today so I was hoping to see a decent amount of results from my various ETF scans. Unfortunately, there were only a few results that were returned and they were in one specific area of the market.
It was clear that Energy and Crude Oil rallied the strongest today. In addition, they are showing incredible relative strength against the SPY. After a brief pause in the rally, Crude Oil shifted into high gear today making Energy ETFs and Commodities ETFs the place to be.
I've selected XLE as a "Diamond in the Rough" today. I try to avoid giving you actual sector charts, but today it was one of the best charts out there. We also have "under the hood" indicators to evaluate.
I didn't present it today, but Biotechs are showing some short-term strength right now. The PMO is turning back up on both XBI and IBB, but it is too early and this is a volatile area of the market. One I wouldn't want to be exposed to under current market conditions.
Good Luck & Good Trading,
Erin
Today's "Diamonds in the Rough": BNO, GSG and XLE.
Runners-up: DBO, XES, IEO, IBB and XBI.
RECORDING LINK (9/15/2023 - No recording on 9/22):
Topic: DecisionPoint Diamond Mine (9/15/2023) LIVE Trading Room
Passcode: Sept#15th
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When: Sep 29, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (9/29/2023) LIVE Trading Room
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Here is the last recording from 9/25:
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.
United States Brent Oil Fund (BNO)
EARNINGS: N/A
BNO tracks the Brent oil spot price using near-month ICE futures contracts.
Predefined Scans Triggered: Elder Bar Turned Green, New CCI Buy Signals, Moved Above Upper Keltner Channel, New 52-week Highs, Moved Above Upper Price Channel, Parabolic SAR Buy Signals, P&F Double Top Breakout and P&F Triple Top Breakout.
BNO is up +0.03% in after hours trading. You'll note some similarities on some of these charts. Most have a bullish flag formation. In the case of BNO, the flag itself is a bullish falling wedge. Both patterns were confirmed with today's gap up breakout. The PMO has now surged above the signal line and Stochastics turned up in positive territory. The RSI is quite overbought which is a problem, but given production cuts, we expect that condition to persist. Volume has been coming in steadily with a big thrust in volume today. It is outperforming the SPY by a mile. The stop could be tighter if you wish, but I've opted to set it at 6% or $30.81.
BNO had been traveling in a declining trend channel. It is now in a confirmed uptrend. The weekly RSI is positive and not quite overbought yet. The weekly PMO is rising with price and isn't overbought. The StockCharts Technical Rank (SCTR) couldn't be much better; it's well within the hot zone* above 70. Upside potential should it reach resistance is about 13%. I think it could move higher.
*If a stock/ETF is in the "hot zone" above 70, it implies that it is stronger than 70% of its universe (large-, mid-, small-caps and ETFs) primarily in the intermediate to long terms.
iShares S&P GSCI Commodity-Indexed Trust (GSG)
EARNINGS: N/A
GSG uses index futures contracts to gain exposure to a production-weighted index of front-month commodities futures contracts.
Predefined Scans Triggered: Elder Bar Turned Green, Parabolic SAR Buy Signals and P&F Double Top Breakout.
GSG is up +0.44% in after hours trading. Crude Oil is a commodity and part of this Trust so you'll see similarities to the other two charts today. There is a bullish flag formation that was confirmed with today's breakout move. The RSI is positive and not yet overbought as it is for BNO. We do expect higher prices so we should also expect to see an overbought RSI soon. Based on its last foray into overbought territory, we know it can stay that way for days. The PMO is on a Crossover SELL Signal but today it turned back up. Stochastics turned up in positive territory. Volume is strong as is relative strength. I've set the stop below support at the August top and 50-day EMA at 4.7% or $21.75.
The weekly chart shows very little overhead resistance for GSG to contend with. The weekly RSI is positive and not overbought. The weekly PMO is rising on a Crossover BUY Signal. The SCTR couldn't get much better as it sits atop the hot zone. Upside potential should it reach the next level of resistance is over 16%.
Energy Select Sector SPDR Fund (XLE)
EARNINGS: N/A
XLE tracks a market-cap-weighted index of US energy companies in the S&P 500.
Predefined Scans Triggered: Elder Bar Turned Green, P&F Ascending Triple Top Breakout and P&F Double Top Breakout.
XLE is up +0.17% in after hours trading. Part of the reason Diamonds went out late today was that I wanted to have the participation data for XLE. I'm glad I waited. Look at the spike in %Stocks > 20/50EMAs. Internal strength is visible and should carry XLE higher. The PMO has turned up and the RSI is rising again in positive territory. Stochastics are bullish and of course, this sector is outperforming the market by a mile. I've set the stop at support at the April top at 6.7% or $85.97.
The weekly chart is very bullish given the rising weekly PMO which bottomed above the zero line and the weekly RSI sitting in positive territory. The SCTR is excellent at 97.8%. Since XLE is near new highs, consider an upside target around 17% to $107.81.
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% 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 3:00p 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:
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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