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Latest From The Blog

Technology Sector Overview: 12/10/18

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Bad Apple, Rotten Core? For a week that started on a fine note rising more than 110 handles on Monday, it ended anything but. The week endured TWO 3% plus declines, the first since the week ending 2/9 which slumped 5.1%. The tech rich benchmark has fallen 7 of the last 10 weeks, and all seven CLOSED at or near lows for the weekly range. It was its SIXTH consecutive weekly CLOSE below its 200 day SMA, and last week recorded an ugly bearish engulfing candle finishing more than 500 handles from the intraweek high. Since the beginning of October the index has registered FIVE lower highs, and the volatility in continues to show is very indicative of topping action. It now stands 14% off most recent 52 week highs, compared to the S&P 500 and Dow which are each 10% off their own, and is less than 1% higher for 2018. AAPL easily the Nasdaq's largest component, is now 28% off most recent all time highs, and lower 9 of the last 10 weeks. The break below the round 170 number Friday could be significant. The downgrades of the stock seem relentless, but for once the bevy of analysts could be correct.  "Old tech" Bull Trap: As investors we must always acknowledge when we are wrong and act swiftly. It is fine to be wrong but not stay wrong. When one is mistaken in a trade, which will happen often, move to the sidelines. Below is a good lesson on this with the chart of INTC and how it appeared in our Technology Report on 11/14. Let us be clear that we were WRONG about this set up, but I was confident that the more times this supertanker semiconductor would touch its 200 day SMA the better its chances of breaking through it. It aligned with the very round 50 number as well, but it did break above it this past Monday and CLOSED above the 200 day SMA too. The candlestick was questionable at best as it recorded a spinning top. The set up is a good illustration of why no matter how solid the potential looks one must be willing to sever their emotional ties to it. The stock fell more than 6% this past week and its cup base whose right side was under construction looks vulnerable at best. Examples: In the overall fragile environment we are currently in, look for names that are shrugging off the softness. To be clear we are speaking of recent firmness as the stock here LASR, is still 56% off most recent 52 week highs. It rose this week, albeit by just five pennies, but it was respectable relative strength as the Nasdaq fell nearly 5%. Below is the chart and how it was profiled in our 12/3 Technology Report (trigger has not be taken out as of this writing). Keep in mind this is a recent IPO so these tend to be under looked and under covered. The last 3 weeks have CLOSED very taut, all within just .17 of each other, and this type of coiling action normally leads to explosive moves. It recently broke ABOVE a bear flag formation, and moves that occur the opposite way they are expected to, often can be powerful too. The very round 20 number is coming into play with 14 consecutive CLOSES under, 12/4 finished precisely at 20, and the longer it spoons its 50 day SMA the more likely it is to break to the upside.

Healthcare Sector Overview: 12/7/18

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Healthcare Hammer: On a wild session where the Dow CLOSED 700 handles off its lows, and the Nasdaq bounced off the very round 7000 number registering a bullish counterattack candle, healthcare put in a mediocre performance finishing the 7th best of the 11 major S&P sectors. Some names like FATE were unable to extend winning streaks, with this one up 10 sessions in a row, but Tuesdays spinning top was some foreshadowing. To be balanced there was some M&A activity this week with TSRO being swallowed by GSK, jumping 58% on Monday. It was higher 10 of 11 days PRIOR to the announcement, with the lone down day on 11/28 recorded a bullish hammer off the very round 40 number. Talking about round numbers and hammers the XLV did just that today with a move off the very round 90 number. It was unable to break above the 96.16 cup base trigger we spoke about in our last Healthcare Report, but it may be resetting here. Bear in mind healthcare is still the best acting group of the major S&P sectors, so if this rally that began at lunchtime were to continue, this space should be a big beneficiary.  Big Four Bifurcation: If you are as old as I am one remembers when the "big four" biotech names ruled the healthcare space. Sure they were volatile, but they garnered the most attention. Obviously there are not as relevant as they once were. Of course there will be some disparity in their YTD performance to be somewhat myopic, and the undisputed winner of the bunch is AMGN, which has risen more than 14% so far in 2018. The clear laggard is CELG which has fallen by more than 30% YTD. BIIB and GILD have hovered near the UNCH line, as BIIB is up just better than 1% and GILD is lower by nearly 3%. To me the most investable at the moment appears to be BIIB. It endured a 100 handle decline falling from 388 on 7/25 to 288 on 10/25, a sizable loss in such a short period of time. Some stabilization has begun as it filled in a gap on 10/25 from the 7/5 session, and notice that occurred at the very round 300 number. The stock quickly recouped its 200 day SMA and found support there with a bullish engulfing candle on 11/15, and another one on 11/23. Thursday it recorded a bullish piercing line candle, retesting both of the prior engulfing candles from 11/15 and 11/23. Enter with a buy stop, and as always a CLOSE, above the round 330 number and add to through a double bottom trigger of 358.51. Examples: Keep in mind the longer a pattern forms and subsequently breaks out, the greater the probability of the move being successful. Below is a good illustration of GKOS, and how it was presented in our Healthcare Report from 10/31. A relatively deep WEEKLY cup base trigger of 52.58 was taken out the week ending 8/31 which flew higher by more than 55%. The breakout was retested the week ending 11/9, in that seventeen month base. Since then it has acted well and we know the best breakouts tend to work out right away. It nearly doubled the XLV 7% weekly gain last week, and is now offering yet another add on opportunity (remember leaders give you add on entries on the way UP). Not surprisingly the round number theory is coming into play with the 70 number trying to act as a double top. That scenario would be negated with a buy stop above a 71.01 pivot.

Energy Sector Overview: 12/5/18

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Energy Group Yearly Returns: Energy has been quite a volatile performer in recent years as the chart of the last 10 years attests. More recently it has been even more true, as 3 of the last 4 years have been either the best or worst actor (with the only exception being 2017 where it missed being the worst actor to the telecom space by just 30 basis points) of all the major S&P sectors. This year with less than one month left, the XLE is keeping true to form as it is the second worst behaved group, as only the materials have fallen more (on a 3 and 6 month time period it IS the worst behaved of the 11 major S&P arenas). Therefore I would conclude that it is likely there are more losses in store into year end for energy. Not getting much attention is the action of the solar group, which should be weak given the energy drawdown as it loses its competitive edge. The TAN ETF broke above its 200 day SMA one month ago, a line it was beneath since June. It filled in a gap on 11/14 from the 11/2 session and I think a retest of the very round 20 number, if tested, would be a good risk/reward scenario. WTI Price Action Ready To Drill Higher? Crude has certainly seen a precipitous drop. That there is no question about. Many can debate the reasons why, the most logical I hear is the supply side of the equation with the US now the worlds largest producer. But any justifications for it come in a very distant second to PRICE action. That is all that really matters. That is how investors are paid so price should be and is omnipotent. Below is the daily chart of crude and it shows the failed breakout above a cup base trigger just above 75 in early October. It actually did breakout but the move lasted just 4 sessions before falling back underneath the trigger. On the positive side there have been some bullish, bottoming candlesticks with strong support, for the moment at the very round 50 number. There was a doji candle on 11/27 and both days of 11/29-30 both traded intraday below 50, but both CLOSED above the figure. Its weekly chart last week shows a bullish harami, which doubled as a spinning top (another candle that tends to predict changes in trend) that ended a deep 7 week losing streak. Bulls have their line in the "frac" sand as a reference point and stop. Examples: Even best of breed names lose their status, and although it is important to remember that new bull markets are driven by fresh leadership, one should always be cognizant of the strong players as they can also contribute powerfully on the way up. I remember in the not too distant past that the two generals in the space were PXD and EOG. Both have come under hard times as PXD is now 32% off most recent 52 week highs and EOG is 22% off its own. PXD was unable to make much headway above the very round 200 number with two CLOSES above the weeks ending 5/11-18 before falling back to earth (that was also a long cup base breakout above a 199.93 pivot in a pattern 15 months long). Below is the chart of EOG and how it was presented in our Energy Report on 11/28. The round number theory comes into play here as the very round par figure has not seen a WEEKLY CLOSE below in 2018, even though EIGHT weeks were below 100 intraweek. There was a bullish engulfing candle on 11/15 and play from the long side as long as that catalyst still exists.

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