Douglas Busch

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ChartSmarter Thursday Game Plan 4/5/18

Markets demonstrated classic bullish behavior Wednesday as they started very hard upon their lows and went out at session highs. PRICE certainly showed capitulation, but volume was a bit flat and that is ok as that could be the case in turnaround situations as their is not much belief among investors at the start. The Russell 2000 again showed strength as it was the first benchmark to turn green. It rose by 1.3% and the Nasdaq was the best behaved up by 1.4%. Notice Tuesday harami candle looks very similar to the 2/9 harami and both of those were preceded the day before with big down days. The tech rich index went on to almost rally a quick 1000 handles from there. The Dow rose by 1% even being held back somewhat by its largest priced component BA falling by the same amount (only two other names in the Dow fell today being the energy giants XOM and CVX). The VIX backed off yet again near the 25 number. Is this the beginning of something real or just another dead cat bounce? No one knows for sure and we have to keep in mind that corrections take many months and the major averages have run very powerfully over the last several years. Bulls may be happy with sideways action the rest of 2018.

Looking at individual groups on the huge turnaround today, one would have like to seen better leadership than the cyclicals and staples. The XLY added 1.8% and XLP rose by 1.5%, followed by the healthcare and technology as the XLV and XLK added 1.4%. The utilities and energy were the laggards today as the XLU was higher by .2% and energy was down .1%. The XLU has been steadfast and the bottoming process is ongoing and now has the look of an unorthodox bullish inverse head and shoulders formation that started in the beginning of January. A break above 51 would see a measured move of 4 handles which would begin to set up an add on buy point near a cup base trigger of 57.33.

We have spoken a lot with retail recently, as the group has been overall strong. Whatever the reason it is, the tax cuts, consumer confidence numbers, we do not care. It is all about PRICE action. Below is the chart of UAA, and how it appeared in our Tuesday 4/2 Game Plan, which to be fair has been a laggard. Even after todays break above a bullish falling wedge rising more than 6% it still sits 24% off most recent 52 week highs. But even weaklings find strength and this chart is improving ever since its bullish counterattack candle recorded on 2/6. Give the stock credit as it has bobbed above and below its 200 day SMA, which would have sunk many a laggard. Its 50 day SMA is sloping higher and has been making higher highs and lows since last November. It this name going to become a NKE or ADDYY again, highly doubtful, but on its weekly it is forming a bull flag and a move above 18.30 could propel the stock another 6 handles.

ChartSmarter Wednesday Game Plan 4/4/18

Markets were up and down a couple times Tuesday, but throughout the Russell 2000 led and ended the session higher by 1.3%. The Nasdaq added 1% and was negative with less than 90 minutes to go. AAPL recorded back to back bullish hammers today, and AMZN did the same thing last Thursday and Friday and today registered a bullish harami. To be very clear there is still lots of work to be done as both of the aforementioned stocks remain below their 50 day SMAs, and FB is still swimming underneath its 200 day SMA. Obviously they have a huge factor on what the Nasdaq does. We continue to monitor the Russell 2000 and the VIX for clues. The Russell did bounce off its 200 day SMA for the second time Monday and showed some decent follow through. It recorded a nice inside day, although it was easy give the 40 point range Monday, and to be fair, it did so on 3/26 only to continue slumping. The VIX fell Tuesday but remains comfortably above its 50 day SMA which is nearing the very round 20 number. Just four months ago it was trading with a single digit handle, as it resided below both its 50 and 200 day SMAs.

Looking at individual sectors it was energy that led with the XLE higher by 2.1% (the top 3 actors were under performers as materials and healthcare rounded out the top 3). The ETF is lower by 14% from its most recent 52 week highs and has declined 5 of the last 9 weeks. It is making very little progress since marking the 25 MONTH double top which was just separated by 6 pennies the weeks ending 12/16/16 and 1/26/18, with intraweek highs of 78.45 and 78.39. That being said the bear flag is getting long in the tooth and if XOM, at 23% of the ETF, can catch any type of momentum, a big IF, than the XLE could spring ahead. The 800lb gorilla in the space has the look of a bullish falling wedge above 75 as it CLOSED just above it today, and it is making higher highs on RSI showing some positive divergence with PRICE. I would be more in tune to play leaders in the group instead of XOM, but its huge weighting could give leaders an extra boost. Lagging Tuesday were technology and utilities.

The retail space like most groups, especially now as markets frown and the leaders are separated from the laggards, is bifurcated. There have been some robust moves in the small cap names with LE coming to mind, higher by 40% the last 2 weeks alone. CTRN has jumped by the same firm amount but took 3 weeks to do so. BURL, LULU and even NKE has remained strong during the recent overall downturn. Below we look at M and how it was profiled in our Thursday 3/15 Game Plan, and it was a notable laggard between June '15 and November of last year, but since then its chart complexion has turned around nicely. Accumulation has taken place with big up volume weeks ending 11/10, 12/1 and 3/2 advancing 8.8, 14.8 and 13.2% respectively. The round number theory has come into play with the 30 figure and a bull flag formation. It also expresses the importance of CLOSING prices as it was above the 30.25 trigger on Monday but reversed. Keep in mind 30 was resistance one year ago last April and May so a decisive move above could propel this stock up in a meaningful way. Today it did not join the party.

ChartSmarter Tuesday Game Plan 4/3/18

Markets were throttled Monday, after a somewhat benign session last Friday that did CLOSE well off intraday highs late. The "leading" Nasdaq is now LOWER on a YTD basis after today and Mondays have become very volatile as 3/26 ROSE 3.3% and today dropped by nearly the same amount. The tech rich benchmark is now lower by 10% off most recent all time highs and is now roughly 100 handles above its rising 200 day SMA. All the talk was about the softness in AMZN, but the semiconductors fell by 4% and biotech by 5% as both the SMH and IBB are trading near the very round par figures. The S&P 500 was unable to finish above its 200 day as it slumped 2.2% for the first time in two years. Will it be a bear trap? That remains to be seen but this erratic trade is anything but bullish and the VIX exploded by nearly 20% today as it attempts to break above a 26.11 double bottom with handle trigger, although it continues to reverse near the 25 number. It has been acting very well since the successful retest of the 15 cup base trigger on 3/9.

Looking at individual sectors it was no surprise that none of the major S&P groups rose Monday, and also that the utilities were the best performer. The XLU is still doing battle with the very round 50 figure, and its 50 day SMA looks like it wants to slope higher for the first time in months, but also has the look of a bearish falling wedge, not surprising given how soft the group has been overall. The ETF still dropped .8%, but far outdid any of its peers as all of the other 8 lost between 2 and 2.9%. Technology was among the hardest as the XLK lost 2.5%. The ETF has now declined an amazing 11 of the last 14 sessions and 6 of the last 7 days have moved 2% in either direction as volatility remains elevated. It has remained above its rising 200 day SMA for two years now, and it seems everyone feels a retest will be successful. Well we all know what usually happens when there is a consensus.

At ChartSmarter I am huge believer in CLOSING prices as I often if not always capitalize the word. The adage goes the real holders let there positions known by carrying overnight. Of course they hold them for numerous nights, perhaps months or years into the future. Below is the chart of a material name VSM and how it appeared in our Friday 3/9 Game Plan. The stock is currently 14% off most recent 52 week highs and one can see how the round number theory came into effect as well with no weekly CLOSES above the 40 figure since the week ending 11/3/17, even though the last 4 weeks traded above 40 or within pennies. On a daily basis there was just one CLOSE above on 1/23. Those who tried to front run the good looking double bottom trigger of 40.27 are not underwater sizably on a capital basis and perhaps even more so on a mental capital basis too.

Past and Present View on HLF

Always keep a close eye on stocks that are acting much better than the overall market demonstrating great relative strength. Today we take a look at HLF which was in the headlines some years back with Ichan and Ackman. Ignore the noise and focusing purely on PRICE action would have benefitted one handsomely. The name is having a very strong 2018 up 44% as the S&P 500 is LOWER by 1.2% YTD. Below we take a look how the round number theory affected this name in the past and presently.

This name was not affected much by the recent overall market downtrend and looks to be shedding itself from a 3 year double top. HLF is a nutrition name higher by 19% YTD and 35% over the last one year period. Earnings have been mostly lower with losses of 2.9, 1.9 and 4.5% on 11/3, 8/2 and 2/24 and a nice gain of 11.6% on 5/5 (REPORTS 2/22 after close). The stock is higher 3 of last 4 weeks and last weeks drop of .9% digested the prior 3 week winning streak that rose 16% in good volume. It is holding above 79.74 cup base trigger taken out on 1/26. Enter HLF with break above bull pennant as 82 which carries measured move to 96. Keep in mind stock had issues with round 80 number dating back to December '13-January '14 too so decisive move above could be powerful.

ChartSmarter Monday Game Plan 4/2/18

Markets displayed impressive resilience Friday, but did finish off session highs. It was refreshing to see the Nasdaq lead as the tech heavy benchmark added 1.6%. It did complete a bullish morning star pattern Friday and the candles have been adept in marking near term lows with the bullish harami on 2/9. FB did record a bullish hammer weekly candle, squeezing out a .40 gain, but is still well below a bearish head and shoulders formation that aligned with the round 170 number. AAPL reversed hard Friday at its downward sloping 50 day SMA and has now CLOSED below that important line 6 of the last 7 days. AMZN although ended the day underneath its 50 day SMA for the second straight day, but CLOSED well off session lows by 45 and 82 handles on Thursday and Friday. NFLX was well below its own 50 day SMA but did reverse powerfully and ended the day above its 50 day SMA, something it has done everyday in 2018. It still has to deal with bearish engulfing candles on 3/12 and 3/27 so lets see how this scenario plays out. The VIX completed a handle on its double bottom base Friday, and its first CLOSE below the very round 20 number. As long as it remains above the 15 number bulls should be playing defense.

Looking at individual groups all nine of the major S&P sectors gained ground Friday. It was the energy space that saw the best gain as the XLE rose by 2.1%, although on a weekly look it was the softest performer "rising" 1%. It was followed closely by technology as the XLK advancing 2% Friday, followed by materials, industrials seeing the XLB and XLI higher by 1.9 and 1.5%, and discretionary and financials both up 1.4%. Lagging was the defensive, moribund healthcare, staples and utilities with the XLV, XLP and XLU losing .8, .7 and .6%. On a weekly basis, all of the major S&P sectors rose, but it was the utilities that rose 3%, the second best showing this week behind the staples rising 3.5%. Suspect leadership as the staples have lost ground 6 of the last 9 weeks, and for that reason bulls have to keep their enthusiasm contained. For instance one would have to go back 4 weeks to see an accumulation week ending 12/8 for the XLF. A look on the weekly chart of the XLF shows the financials did record a bullish harami this week, so the tug or war between bulls and bears continues.

The financials have been under pressure recently but the XLF put in a decent weekly return higher by 2.8%. The ETF is now 9% off its most recent 52 week highs and is finding support near its rising 200 day SMA like it did early last September, before it thrusted higher after a quick test. It did record a bullish spinning top candle after losing more than 10% from the round 30 number which was resistance this January. Below is the chart of ETFC and how it appeared in our Monday 3/26 Game Plan. It is said the "dumb" money is often a good indicator of a market top, but this stock advanced 4.4% well outpacing the XLF. It did find support at its rising 50 day SMA after a recent cup base breakout, almost everyday last week, one our favorite plays. Friday saw robust volume as it bounced 3.4%. Investors may deposit capital into this name with a good risk/reward scenario here, pun intended.