Douglas Busch

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ChartSmarter Monday Game Plan 10/23/17

Markets were energetic in the early going and never saw red ground as all of the major averages were well behaved. The Dow has rose 15 of the last 18 sessions and is now on a six week winning streak with all of them CLOSING right at highs for the weekly range. The Dow was easily the best performer this week rising 2%, and the bears will point to the fact the investors are yearning for some old, boring names which is just the type of action you see near the end of a bull market. The say it is now how you start but how you finish as the Nasdaq advanced for a sixth straight Friday. The tech rich index rose .3% this week and the S&P 500 galloped ahead by .9% this week and is on a firm 6 week winning streak as well. The Russell 200 gained .4% and is on the verge of a bull flag breakout. The IWM has CLOSED the last 3 weeks remarkably taut within just .68 of each other. Bulls will be correct to mention that the small caps often lead, and if this flag is taken out this could ignite a whole fresh wave of buying.

Looking into individual sectors today it was the financials, industrials, materials and technology that were the finest actors. The XLF and XLI both advanced more than 1% Friday and the staples were the only major S&P sector to lose ground today with the XLP slipping .2%. PG fell more than 5% this week, registering its worst weekly drop in almost 2 years since the week ending 1/30/15 fell more than 6%, and it looks like a long term double top in the 93-94 was completed the week ending 9/22/17 and began the week ending 12/26/14. Others in the arena are much worse off like CHD now off 15% from most recent 52 week highs and has declined 8 of the last 12 weeks. On a weekly basis only two of the major S&P sectors that fell with the XLE losing .5 and the XLP dropping 1.2%. The financials recent strength is noteworthy but the group is the best performer on a one and three month timeframe as well as the one year time period. Perhaps they are not getting the credit they deserve in contributing to this overall powerful rally.

The transports group should be renamed the teflon sector, as it seems to smooth out and disregard any potential problems that may creep up I was WRONG about being somewhat bearish on the space as the IYT recorded a nasty bearish engulfing candle on 10/13. The ETF ended up finishing higher for the week and the last 4 weeks have now CLOSED very taut all within just 1% of each other. That type of tight action often resolves in a continuation of the prior trend. The JETS (airlines) ETF lost ground this week, but the prior 5 all rose by almost 7%. The rails were led to the upside by CP which put in a stellar week advancing 5.4%. Below is the chart of a trucking play, ODFL, and how it appeared in our Friday 10/13 Game Plan. Today it drove to all time highs, pun intended, and taking out a bull flag formation that started at the very round par number while rising 10 of 11 sessions between 9/15-29. Look for a move to the next round number into year end at the 120 figure.

ChartSmarter Friday Game Plan 10/20/17

Markets put in a productive session Thursday finishing well off session lows. The S&P 500 overcame a modest early loss of .5% to CLOSE near the UNCH mark. The Nasdaq cut a 1% deficit in more than in half to end up lower by .3%. The Russell 2000's flag continues to fly and it is still to be determined if it will continue to the upside and it lost .2% today. For the week heading into Friday the Nasdaq, which recorded a nice bullish hammer candle, is lower by .1% and looking to complete a bullish 3 week tight pattern depending on tomorrows close. The S&P 500 is higher by .3% and setting up for a SIXTH consecutive weekly gain. Tech is still being weighed down by its big components having difficulty with the big round numbers with GOOGL and AMZN batting with 1000 and NFLX the 200 figure. The fact that all three are struggling to move higher after recent breakouts is a big concern.

Looking at individual sectors the utilities and healthcare groups were strong. The XLU, which gained 1%, has demonstrated nice follow through since the bullish piercing line candle recorded on 9/28. Since the week ending 11/18/16 it has displayed a series of higher highs and lows and now has in place a cup base trigger of 56. The XLV added .6% and broke above a bull flag and is not inconceivable to travel to the round 90 number into year end. Industries lagging included energy, technology and the staples. The XLP is still feeling the heat following its 2.4% loss the week ending 9/22 which was its worst weekly drop since the week ending 9/9/16 which fell 3.9%. The fund is clearly under distribution and looks headed for a test of the very round 50 number, which better hold last trading at that figure last November-December.

Even as tech lagged today with the AAPL rotting as it sliced its 50 day SMA to the core, pun intended, some names are behaving well. For one ADBE screamed higher by 12% after delivering a solid quarter and it has been an excellent performer higher 31 of the last 41 weeks and almost assured another in the win column advancing by double digits headed into Friday. Below is a lesser followed name DXC and how it appeared in our Thursday 9/28 Game Plan. It is yet another example of a good looking bull flag formation that was taken out on 10/6 and acting firm POST breakout, just what you want to see as the best breakouts often work out right away. It added more than 4% on 10/12 crossing and more importantly CLOSING above the round 90 number and names that cross that threshold often go on to reach par and beyond. The stock is higher 10 of the last 11 weeks and trades extremely taut, unusual for a recent IPO and a hallmark bullish characteristic.

ChartSmarter Thursday Game Plan 10/19/17

Markets were somewhat bifurcated today as the Nasdaq and S&P 500 were near the UNCH line, but it was the Dow and Russell 2000 that rose .7 and .5% respectively. IBM contributed in a big way, as the Dow is a price weighted index and is impacted more by the larger priced components. It screamed higher by nearly 9% after a well received earnings release, its first gain after back to back drops of 4.2 and 4.9% on 7/19 and 4/19 and pushed it above the round 23000 number. The flag on the Russell 2000 is looking much better after today and a move above 1515 could ignite this benchmark even higher. The Nasdaq and S&P 500 continue to ascend well above their rising 50 day SMAs and one would think they will revert to test it. The S&P 500, for one, has been in contact with the line every month between March-September so far in '17.

Looking at individual groups it seems to be either hit or miss with the financials and today they led the way with the XLF advancing .4%, followed by technology and healthcare. Lagging Wednesday was the energy group with the XLE providing a tug of war between the bulls and bears at its 200 day SMA. The ETF fell .7% today, by far the worst sector as the second softest were the cyclicals off .25% via the XLY. The whole of tonights report is dedicated to the energy arena. The bears may have an advantage here as the 200 day SMA is still sloping lower, but the 50 day is catching up quickly and it could undergo a golden cross soon if price continues to consolidate.

Below is a member of the beleaguered retail space, and how it appeared in this Tuesdays Game Plan, which aside from the discount names has been encountering difficulty. This is a good example of two things. First being always be wary of potential M&A activity, and two the round number theory. The company on 6/8 jumped more than 10% after the family announced it was looking to take the company private. Notice that news came as the stock was hovering right at the round 40 number, a figure that was support dating back to the weeks ending 8/5/16, 5/19 and 6/9/17. This Monday it was said that those plans were no longer the case and the stock sank more than 5% on huge trade, but did CLOSE above the 40 number. It also filled in a gap from the 6/7 session and the week is still young but has now reversed almost 6% to the upside. Pay attention to gap fills and round numbers and when both align at the same spot even better (the very round 50 number was resistance on 5/4, 5/10 and 7/27).

ChartSmarter Wednesday Game Plan 10/18/17

Markets were a bit dull Tuesday as the daily slog continues. Slightly noteworthy may have been the weakness in the Russell 2000 falling .3% and potentially damaging the current flag formation. It needs to get going quickly and the doji candle on Monday may have been some foreshadowing. The Dow which we rarely focus on did touch the round 23000 number and it is has now rose 12 of the last 15 sessions (all three lower days lost less than .15%). The Nasdaq recorded its own doji candle Monday, and remember these are just warning signs, that one could look back on and play Monday morning quarterback. They are useful though and can be used to shave positions and buy back on weakness. As always there are a few things to be concerned about as I read the Barron's this weekend and almost every money manager was bullish. Sentiment as well is a poor market timer but something to be aware of.

Looking into individual groups Tuesday, winners were led by healthcare with the XLV higher by 1.3%. The ETF has an unorthodox looking bull flag, if you find a perfect one let me know and I will short it or at least avoid it. A move above 83.50 would carry a measured move to the round 90 number and notice how the flag commenced with a bullish engulfing candle on 8/21. On the other end of the spectrum one cautionary tale is the action in a subsector of the industrials, the transports. The IYT registered a bearish engulfing candle on 10/13 and is nearing a test of a cup base breakout trigger of 175.85, originally taken out on 9/26. Given the timid session Tuesday it was surprising that only 4 major S&P sectors advanced. Lagging today were the financials that fell .5% via the XLF. GS is the second financial to record a bearish reversal after earnings showing a bearish engulfing candle today. C did so last week, and now GS is off a quick 8% from most recent 52 week highs after a bearish evening star pattern was completed on 10/9.

We are always on the look out for strong action in somewhat recent IPOs as they are often under followed and can offer superior returns for that reason. Below is the chart of MTCH and how it appeared in our Tuesday 9/19 Game Plan, and it has now advanced 71% since inception almost 2 years ago. Volume trends have been very bullish and it has registered plenty of nice advances including weeks ending 9/1, 9/15 and 10.6 which jumped 18.1, 6.2 and 9.4%. I am a big proponent of the round number theory and this name had some relevance with the very round 20 figure, being stopped there the weeks ending 10/28/16 and again 5/5-6/2/17, before blasting above on a CLOSING basis week of 9/1. It was a bullish ascending triangle as well with lows made near 15 the week ending 3/30 and it already achieved its measured move to 25, but keep in mind the measured moves are like guidelines. This chart is showing just how forceful "love" can be bringing back memories of Huey Lewis's '85 song "The Power of Love".

ChartSmarter Tuesday Game Plan 10/17/17

Markets, dare I say registered yet another lackluster session to begin the week. The Nasdaq rose .3%, the S&P 500 by .2% and the Russell 2000 was UNCH. The Dow behaved best adding .4% and this index which recorded a bearish spinning top candle on Friday is now above that and it now sits nearly 800 handles above its upward sloping 50 day SMA. At this point we are nearly into November and for that reason I think tech will outperform heading into year end as portfolio managers, who do not have the FANG names will need to look like they have and window dress appropriately (of course the number of PMs not holding them at the moment is most likely few). AAPL did help the Nasdaq today rising almost 2% on an upgrade and is now testing the round 160 number and we highlighted this name in our Monday 9/23 Game Plan as a buy off the 150 number which also coincided with a gap fill from the 8/1 session.

Looking at individual groups on Monday it was financials, tech and energy that were the best actors with the XLF rose .6%. It did have some issues last week especially after C and JPM reported earnings last Thursday. The ETF still looks promising as it can complete a bullish 3 week tight pattern depending on Fridays CLOSE, with the last 2 weeks both finishing within just .22 of each other. Energy is still proving the naysayers wrong and we mentioned in Mondays Game Plan that it has the potential to break above its own 3 week tight trigger of 69.03, which could also be interpreted as a bull flag formation. A move through 69.03 would have a measured move to 76. Ironic now that crude has seemed to stabilize here recently that the Aramco IPO may be put on the shelf. Lagging today were the utilities and healthcare sectors with the XLU and XLV surrendering .2 and .4% respectively.

As the major averages trading on the boring, dull side select names have made some major moves and then paused forming bullish continuation flag patterns. Below is a good example of the consumer electronics play DLB and how it appeared in our Monday 10/2 Game Plan. Keep in mind we have discussed how individuals are shifting from a more traditional retail clothing to one in which their experiences are moved. Whether this is out of necessity or not makes zero difference to us. We just focus on pure stock PRICE action and let others speculate about the real reasons behind the change. We spoke about NCLH recently and DLB is in that overall consumer arena where shoppers are spending their money on things other than flashy Micheal Jordan sneakers. DLB is now trading near 6 year highs and has taken out a bull flag pattern trigger of 58.40 on 10/12 and is now battling with the round 60 number. Last week demonstrated admirable relative strength up 3.4% after the prior 3 weeks fell by a combined 1.5% after the gigantic weekly advance of 15.5% ending 9/15.