"Diamonds in the Rough" finished the week up on average. Last week's picks are shining brightly with the exception of one of the picks, BLCO, which hit its stop yesterday. This week's picks all show promise moving forward and many of them found their way into my portfolio.
The Sector to Watch came down to two this week, Materials (XLB) and Technology (XLK). It's really a toss up between the two. I'm going to go with XLB, but tech picks should serve you well next week too.
The Industry Group to Watch was easy to pick based primarily on price action. I'll explain more when I cover it below.
I mistakenly said that we would be seeing each other on Monday, but the Labor Day holiday will preempt the free DecisionPoint Trading Room show. It will return the following week.
Have a great holiday weekend! See you next week!
Good Luck & Good Trading,
Erin
RECORDING LINK (9/1/2023):
Topic: DecisionPoint Diamond Mine (9/1/2023) LIVE Trading Room
Passcode: September#1
REGISTRATION for 9/8/2023:
When: Sep 8, 2023 09:00 AM Pacific Time (US and Canada)
Topic: DecisionPoint Diamond Mine (9/8/2023) LIVE Trading Room
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Our latest DecisionPoint Trading Room recording (8/28):
A few items about the spreadsheet: I've put on the spreadsheet whether the RSI is positive (green) or negative (red). The PMO column tells you if it is rising (green) or falling (red). Finally I've added my own "Sparkle Factor" that gives you my assessment going forward, bullish (green), bearish (red) or neutral (gray). The Sparkle Factor is basically my thoughts on whether I expect it to rise or fall. A neutral means it could really go either way so it could be added to a watch list. If you're in a stock I consider "neutral" going forward, the ball is in your court.
Darling:
ON Semiconductor Corp. (ON)
EARNINGS: 10/30/2023 (BMO)
ON Semiconductor Corp. engages in the provision of power and sensing solutions, and technologies for electrification of the automotive industry. It operates through the following segments: Power Solutions Group (PSG), Advanced Solutions Group (ASG), and Intelligent Sensing Group (ISG). The PSG segment offers analog, discrete, module, and integrated semiconductor products that perform multiple application functions, including power switching, power conversion, signal conditioning, circuit protection, signal amplification, and voltage regulation functions. The ASG segment designs and develops analog, mixed-signal, advanced logic, application specific standard products, and application specific integrated circuits, radio frequency, and integrated power solutions. The ISG segment includes the design and development of complementary metal oxide semiconductor image sensors, image signal processors, single photon detectors, including silicon photomultipliers and single photon avalanche diode arrays, as well as actuator drivers for autofocus and image. The company was founded on July 4, 1999 and is headquartered in Scottsdale, AZ.
Predefined Scans Triggered: Elder Bar Turned Green, Parabolic SAR Buy Signals and P&F Double Top Breakout.
Below are the commentary and chart from Tuesday (8/29):
"ON is down -0.31% in after hours trading. I took a look at our Semiconductors (SMH) chart on the website and did find that participation is expanding in a healthy way and felt that a "Diamond in the Rough" from this group was warranted. This could be a very short-term rally so be prepared to be nimble. I like this setup on ON given what appears to be a short-term double bottom. Price is back above the 20/50-day EMAs. The RSI has just entered positive territory and the PMO is showing new upside momentum. The OBV is confirming the rally. Stochastics are still in negative territory but are rising strongly. I picked ON from the group based on the outperformance that is coming in against the group and the SPY. The stop is set a little tighter than I'd like, but to put it beneath support would've made it too deep. You can adjust accordingly from 7.2% or $90.58."
Here is today's chart:
I'm not entirely surprised to see ON as the "Darling" this week. It is a growth stock and a Semiconductor which put it in line to outperform. The double bottom was confirmed. The minimum upside target has nearly been hit, but I would look for a retest of the July high as it is a 'minimum' upside target'. Indicators remain strong and not at all overbought. I see this one rising much higher. (I own ON)
Don't forget, on Thursdays I look at reader-requested symbols, so shoot me an email at erin@decisionpoint.com. I read every email I receive and try to answer them all!
Dud:
UFP Technologies, Inc. (UFPT)
EARNINGS: 11/01/2023 (BMO)
UFP Technologies, Inc. engages in designing and custom manufacturing of components, subassemblies, products and packaging utilizing specialized foams, films, and plastics primarily for the medical market. The firm manufactures its products by converting raw materials using laminating, molding, radio frequency and impulse welding and fabricating manufacturing techniques. It's single-use and single-patient devices and components are used in a wide range of medical devices, disposable wound care products, infection prevention, minimally invasive surgery, wearables, orthopedic soft goods, and orthopedic implant packaging. The firm also providing highly engineered products and components to customers in the automotive, aerospace and defense, consumer, electronics, and industrial markets. Its products include military uniform and gear components, automotive interior trim, athletic padding, environmentally friendly protective packaging, air filtration, abrasive nail files, and protective cases and inserts. The company was founded by Richard L. Bailly, Robert W. Drew, Sr. and William H. Shaw in 1963 and is headquartered in Newburyport, MA.
Predefined Scans Triggered: P&F Double Top Breakout.
Below are the commentary and chart from Tuesday (8/29):
"UFPT is down -0.01% in after hours trading. This is another that has a bullish bias in the long term based on the 50-day EMA being above the 200-day EMA. The decline was severe but price has bounced before hitting the 200-day EMA and just above support at about $150. It is now up against resistance so we will likely see a bit of a pullback. The RSI has just moved into positive territory and the PMO is now rising toward a Crossover BUY Signal. Stochastics are rising strongly in positive territory. I like that relative strength is improving across the board. I've set the stop halfway down the prior trading range at 7.7% or $163.30."
Here is today's chart:
I was surprised to see UFPT underperform as the set up looked really good. It still could as the chart is every bit as positive as it was on Tuesday. The only reason I didn't add it to my portfolio was that price is stuck beneath strong overhead resistance. The indicators are positive still. Even Stochastics remain above 80. It was a good week, this one just didn't perform as well as the others. It remains bullish in my opinion.
THIS WEEK's Sector Performance:
DecisionPoint Sector Scoreboard (Mechanical Trend Model Signals):
Click Here to view Carl's annotated "Under the Hood" ChartList!
Sector to Watch: Materials (XLB)
What swayed me toward Materials instead of Technology was the rally out of the low. It has been forceful and price gapped up today. There is strong momentum entering this sector. The RSI tells us that despite the rally, price is not overbought. The PMO just triggered a Crossover BUY Signal. The Silver Cross Index just saw a Bullish Shift or positive crossover the signal line. Participation is expanding and is well above our 50% bullish threshold. I think Technology will do well alongside Materials.
Industry Group to Watch: Water ($DJUSWU)
Price is scooping upward and has formed a nice cup shaped base. There is a brand new PMO Crossover BUY Signal and the RSI just hit positive territory. Stochastics are rising in positive territory. Today price also just moved above resistance at the May low. There aren't a ton of stocks within this group to look at, but I do like Alcoa (AA) and Kaiser Aluminum (KALU).
Go to our Under the Hood ChartList on DecisionPoint.com to get an in-depth view of all the sectors. On StockCharts.com you can find the Industry Summary.
Good Luck & Good Trading!
- Erin
erin@decisionpoint.com
Full Disclosure: I'm 50% long, 0% short. I own ON.
Watch the latest episode of the DecisionPoint Trading Room with Carl & Erin Swenlin on Mondays 3:00p EST!
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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 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 selection of "diamonds in the rough."
Helpful DecisionPoint Links:
DecisionPoint Shared ChartList and DecisionPoint Chart Gallery
Price Momentum Oscillator (PMO)
Swenlin Trading Oscillators (STO-B and STO-V)
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