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ChartSmarter Wednesday Game Plan 8/8/18

Markets:

  • The Nasdaq made it 6 straight Tuesday, with an advance of .3%. It did register a spinning top candle at the round 7900 number, which could indicate some fatigue. That was even with its largest component AAPL recording a bearish engulfing candle at all time highs. Perhaps it was affected by the news China may target the name in a trade war. To technicians news is just noise, and a little pullback could be healthy and even warranted as it sits well above its 194.30 cup base trigger it broke above on 7/25.
  • The VIX printed a bullish hammer candle today, as it traded with a 10 handle for the first time since 5/4, whose session had a much longer tail. It makes sense to buy protection down here while you can as it did find support at the bottom declining line in a bullish falling wedge. It remains nestled beneath both its 50 and 200 day SMAs, with stiff resistance at the latter line four times in the last month. On its weekly chart one can see the last break above a bullish falling wedge occurred in February. The 2/6 session met resistance at the very round 50 number in a rapid break that quickly faltered. 

Sectors:

  • Instead of focusing on sectors that led Tuesday, it was nice to see the laggard action, if you are a bull. The defensive trifecta of healthcare, staples and utilities were the softest performers. My guess is that it is a pause as all three of the aforementioned groups have seen nice action as of late. The XLV which lost ground just 6 times in July, is not shying away from the very round 90 number. The XLU has the look of a weekly cup with handle pattern in a base that began the week ending 11/17/17. The last 3 sessions have all CLOSED within pennies of the 53.39 trigger.
  • Among the gainers today the XLI completed a handle on its cup base. The buy point is above 77.09 and the ETF has seen distribution this year since February, but notable is the inability of bears to push the instrument lower. As we have mentioned recently it has traded between the round 70-80 numbers, and it seems to being magnetically pulled toward 80 and a move above can be powerful. The fund is acting better without a ton of help from its largest component BA, which has not seen a gain on higher than average daily volume since 5/21. If it can get going look out.

Special Situations:

The energy space, which has quite frankly confused bit somewhat, is still in the midst of some big consolidation. The XLE is now just 4% off its most recent 52 week highs and a bearish descending triangle now looks like a symmetrical triangle. The services and equipment OIH is lower by 14%, weighted down by weakness in SLB and HAL which together make up 1/3 of the ETF. Below is a chart of GTLS and how it was presented in our Friday 8/3/Game Plan. It has acted well POST breakout from a recent cup base trigger, important as we know the best ones tend to work out right away. Even more to like is how the leader is offering a potential add on buy point. The generals in a group will do that. A bull flag is now setting up in conjunction with the round 80 number. A move and CLOSE above has a measured move of another 10 handles.

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ChartSmarter Tuesday Game Plan 8/7/18

Markets:

  • The Nasdaq made it five straight for the first time in 3 months, and the 50 day SMA which it has successfully retested twice in late June and July is holding up fine. Notice the three of the four previous times it did that it undercut the line between February-April, albeit a short period of time, it spent sometime below it before recapturing it. This is occurring in a weak seasonality period, so give the tech heavy benchmark credit where it is due.
  • The S&P 500 is now just above its cup with handle trigger and one wants to see follow through in the days ahead. This index is looking for its sixth weekly win in a row, and if it can get going remember it had put on a show advancing 19 of 23 weeks ending between 8/25/17-1/26/18. Focusing in on the shorter term, I have heard many voice concerns with the abundance of times it has bounced off the round 2800 number the last 3 weeks. Some say it weakens support at a certain level, some say it strengthens it. Above all PRICE could care less. Follow that.

Sectors:

  • Participation was broad during Mondays lukewarm rally with all 9 of the traditional major S&P sectors (no real estate of telecommunications). Hovering at the top of the leaderboard were cyclicals, financials and technology. The XLY sits just 1% off most recent 52 week highs and the last 4 weeks all CLOSED taut within just .95 of each other. The ETF also responded bullishly with its first touch of a rising 50 day SMA after a cup base breakout from a 109.44 trigger on 6/7, often an ideal entry point.
  • Transports are an intriguing group as the IYT is now attempting to maintain ground above the round 200 figure. It has made higher lows four times, this February, April-June and now key is to gain some momentum above 200. It CLOSED above the figure on 6/12 but quickly surrendered. The ETF is looking for a sixth consecutive up week, which if it happened looks very similar to the 6 week win streak the weeks ending between 5/11-6/15. Only difference this time around volume has been more cooperative. 

Special Situations:

Retail names have begun to lose their momentum somewhat after being firm throughout much of 2018. It could be transitory, but some former best of breed names have shown some fragile signs. Stocks like GIII, DKS an RL are in correction mode down 14, 12 and 11% from their respective highs. Below is another chart that was a general, TPR the former COH and how it was presented in our Thursday 8/2 Game Plan. It has been unable to recover from the 15.5% weekly slump ending 5/4 which came in the second largest weekly volume in 2 1/2 years. The name dropped more than 2% on Monday and is lower by 18% from its own recent 52 week highs and last week FELL 2.2% as the XRT rose 1.3%. A slow bleed going forward is a distinct possibility and stay short with a stop at 48.40.

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ChartSmarter Monday Game Plan 8/6/18

Markets:

  • The Nasdaq rose for a fourth straight session Friday, and if it were not for Mondays 1.4% loss would have been a very solid week for the tech heavy benchmark. That being said it did advance 1% for the week and CLOSED above the 7800 number Thursday-Friday. That was the number where an ugly bearish engulfing candle was recorded on 6/21 at all time highs, so to see it pierce above for a second time so quickly is a good sign indeed. For a second straight time AAPL saw huge accumulation after an earnings report on a weekly basis rising 8.9% this week and 13.2% the week ending 5/4.
  • The Russell 2000 was the laggard Friday falling .5%, and its chart is beginning to have the feel of the XLE with both looking to be on the verge of big breakouts, but stalling near key levels. There is not much in common between the two, but the Russell needs to clear the 1700 number decisively. Do not get me wrong it has had a solid 2018 campaign up 9%, but since mid June has been making lower highs on the RSI. On a longer term timeframe however it must be given the benefit of the doubt, as it is still in the midst of an unorthodox bull flag with a breakout likely showing continuation of the prevailing trend.
  • The S&P 500 has the best look of the three major averages to me as it successfully retested the important round 2800 number and is sniffing out an add on buy point through a cup with handle trigger. On a YTD basis it is rapidly narrowing the gap between it and the Russell 2000 as it is now higher by 6.2% in 2018. Perhaps most meaningful is that this benchmark is holding the baton (value vs growth debate) while the Nasdaq and Russell 2000 take a well deserved breather as they look to make an energetic push in the third quarter into year end.

Sectors:

  • Friday witnessed two of the most defensive groups emerge as winners with the staples and utilities rising by 1.2. and 1.1%. The XLP is now on a 5 week winning streak, with four of them higher by 1% or more, and each week CLOSED at the top of its weekly range and each successive week was greeted with stronger volume. Eighteen of the top twenty holdings in the ETF advanced Friday, with one of the exceptions being EL. The former best of breed name is now LOWER 6 of the last 7 weeks and is now 15% off most recent 52 week highs. It finished the week under its 200 day SMA everyday this week, a line it had been above for the last 14 months. 
  • As one will most likely always encounter there was bifurcation on a weekly basis among the major S&P sectors. The best performer was healthcare as the XLV rose by 2.1% and the laggard was energy with the XLE falling 1.8%. The XLV rose everyday this week and is just underneath the very round 90 number, which it only managed to CLOSE above twice in 2018. The ETF has traded between 80-90, with just three CLOSES below 80 since the beginning of the year. A move through a 91.89 cup base trigger could provide a powerful breakout. PFE above its own round 40 number looks like a must own.

Special Situations:

The overall finance group is acting a bit better, but some names in the very diverse group did not get the lukewarm rally memo. While traditional banks JPM and FRC sit just 2 and 3% off their most recent 52 week highs, investment banks such as GS and MS are 15 and 16% off their most recent 52 week highs. Subsectors within finance that have been acting very poorly are investment service stocks. For example VIRT is lower 9 of the last 15 weeks and has been nearly sliced in half down 47% from its most recent highs and volume trends have been bearish. Below is the chart of CBOE and how it was presented in our Thursday 7/5 Game Plan. To be fair there was a 106 stop on the stock so one would exited as CLOSED 2 pennies above. However Friday it did slip below a bearish descending triangle pattern, which carries a huge measured move lower.

MOO nearing an entry point above a bullish ascending triangle. CF is a best in breed chemicals play higher by 15% YTD and 60% over the last one year period and sports a dividend yield of 2.4%. Earnings have been mostly higher with gains of 12.2, 3.1, 1.3 and 6.9% on 8/2, 2/15, 11/2 and 8/3 and a loss of 2% on 5/3. The stock is higher 12 of the last 17 weeks and this week rose by 10.3%. It acted well POST breakout from a cup with handle trigger of 42.68 taken out on 6/7 and successfully retested that trigger in its current cup base. Enter CF on a pullback into the recent cup base breakout trigger of 46.30 taken out on 8/2 at 48.25.

Trigger CF 48.25.  Stop 45.

Peers VALE and BHP pulling their weight too, a good sign. CLF is a materials play higher by 51% YTD and 46% over the last one year period. Earnings have made a nice turnaround with strong back to back gains of 12.7 and 7.4% on 7/20 and 4/20 after losses of 5.5, 5.6 and 5% on 1/25, 10/20 and 7/27/17. The stock is on a 3 week winning streak up by a combined 28%, and is acting well POST breakout from a flat base trigger of 9.18 taken out on 7/20. Enter CLF with a buy stop above a bull flag trigger of 11.10 which carries a measured move to 14.25. One can add to above a cup base trigger of 12.47 in a base that is 1 1/2 years long.

Trigger CLF 11.10.  Stop 10.50.

Recorded very impressive 14 session winning streak in July. IQV is a best in breed healthcare play higher by 26% YTD and 35% over the last one year period. Earnings have been mostly higher with gains of 6.3, 4.6 and 3.9% on 7/24, 2/14 and 10/26/17 and a loss of 1.1% on 5/2. The stock is on a 5 week winning streak, gaining more than a combined 20%. It sits just 2% off most recent all time highs, after a break above a long cup base trigger of 110.77 the week ending 7/20 in a pattern that began the week ending 11/10/17. Enter IQV with a break above a bull flag trigger of 124.75 which carries a measured move to 140.

Trigger IQV 124.75.  Stop 121.

Activist chatter, but has been acting well before that news came forward this week. IBM is a big cap tech play lower by 4% YTD and higher by 2% over the last one year period and sports a nice dividend yield of 4.2%. Earnings have been mixed with gains of 3.3 and 8.9% on 7/19 and 10/18/17 and losses of 7.5 and 4% on 4/18 and 1/19. The stock is higher 4 of the last 5 weeks and this week rose 1.8% after the prior 3 ending between 7/13-27 all CLOSED very taut within just 1.20 of each other. It is still 14% off most recent 52 week highs and filled in a gap from the 7/18 session. IBM completed a bullish morning star pattern Friday and enter on pullback into formation at 146.25.

Trigger IBM 146.25.  Stop 142.

Good news from a housing related name Friday was welcome news for a group in disarray. ESNT is a mortgage finance play higher by 4% YTD and lower by 8% over the last one year period. Earnings have been very positive with FIVE consecutive gains of 4.4, 3.6, 1.2, 1 and 4.3% on 8/3, 5/4, 2/9, 11/9 and 8/4/17. The stock is higher 6 of the last 10 weeks, including advances of 9.3 and 8.9% the weeks ending 6/8 and 7/20. Enter ESNT with a buy stop above its 200 day SMA at 41.30 and monitor the chart as it builds right side of cup base that began with a rejection at the very round 50 number the week ending 1/26/18.

Trigger ESNT 41.30.  Stop 38.

Good luck.

Trigger summaries:

Buy pullback into recent cup base breakout CF 48.25.  Stop 45.

Buy stop above bull flag trigger CLF 11.10.  Stop 10.50.

Buy stop above bull flag trigger IQV 124.75.  Stop 121.

Buy pullback into bullish morning star pattern IBM 146.25.  Stop 142.

Buy stop above 200 day SMA 41.30.  Stop 38.

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ChartSmarter Friday Game Plan 8/3/18

Markets:

  • The Nasdaq flexed its muscles Thursday moving higher by 1.2% and the liftoff from the rising 50 day SMA should give more confidence to the bulls. Chatter throughout the day seemed to be negative, and give credit for shrugging off sizable premarket blues. The bears have to be getting more frustrated, as many of these short bearish streaks tend to peter out quickly. They point to the markets often topping on big headlines or milestones, and what could be bigger than the APPL $1 trillion market cap. Price action continues to chug along higher, frankly with price action a bit more wide and loose than I would like, but like the adage goes trade the market you have not the one you want.
  • The S&P 500 recorded a bullish engulfing candle right off the very round, important 2800 number. It is higher just 4 of the last 6 sessions and bulls want to see some follow through here, but we have to keep in mind with all the dark talk out there the benchmark is still just 2% off most recent all time highs. The handle on its cup base dating back to late January has a much better look after today. Thursday move put it up for the week heading into Friday and if that holds would be a fifth consecutive weekly gain. 

Sectors:

  • Technology and staples led Thursday, and lets focus on the latter as the former is talked about incessantly this week with AAPL and TSLA. The XLP YTD is the still the worst performer of all the major S&P sectors lower by 4.4% (only other group in the red for 2018 is the materials). However the tide seems to be changing as on a three month look it is the second best actor higher by 10.3%, narrowly being outdone by healthcare with the XLV up 10.5%. The ETF is higher by .6% this week so far and is now above its 200 day SMA as it builds the right side of a cup base with a potential trigger of 59.05.
  • Lagging Thursday was energy and materials as the XLE and XLB fell .5 and .7% respectively. The XLE recorded its first 3 day losing streak in 6 weeks, and on its weekly chart with one session left this week is sporting a bearish dark cloud cover. Add to that the bearish engulfing weekly candles, the weeks ending 5/25 and 6/15 which slumped 4.5 and 3.6% respectively and you have your bearish tilt. Another view of the weekly chart however could be a bull flag, and for that reason I still believe this ETF is in no mans land and should only be participated in on breaks to the upside above 79.

Special Situations:

The housing sector has been under assault since late January, like everything else was but this space has missed out on the subsequent rally. The XHB is 17% off its most recent 52 week highs (pure play ITB by 19%). Both ETFs had patterns sporting bullish inverse head and shoulders formations, but they moved to the downside. Many names even somewhat associated with housing like FND or SUM are now lower by 32 and 38% from their own respective 52 week highs. Below is the chart of OC and how it was presented in our Monday Game Plan this week. It too shows a deep downtrend, now 37% off its most recent 52 week highs, and down nearly 3% headed into Friday. Food, clothing and NO shelter is how the stock market rolls these days.

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ChartSmarter Thursday Game Plan 8/2/18

Markets:

  • The Nasdaq posted a pedestrian gain of .4% considering its largest component put up a powerful gain of more than 5%. Standing in its way was the very round 200 number, but it did recapture the cup base trigger of 194.30 taken out originally on 7/25. Give credit where its due as it recorded its second consecutive spinning top candle CLOSING above its rising 50 day SMA. The fact that AAPL, of course a Dow member now, did not give a better boost to the price weighted index was a surprise as it is only one of four trading above 200. 
  • The S&P 500 has now held the round 2800 number for 12 straight sessions, as it receded nearly 2% recently. Today made the handle on its cup base legitimate, being 5 days in duration now. The Russell 2000 is still battling with resistance at its upward sloping 50 day SMA, similar to the late April-early May occurrence, before taking off gaining 25 off 33 days beginning with the 5/4 session decisively ending above the 50 day SMA.
  • The market feels heavier than just being a few percent off all time highs. Wednesday brought weakness in airlines, oil, retailers and gold. Feels pretty diverse. The IYT is having issues with the very round 200 number once again, so soon after doing so in early June too. The GLD is looking at a possible 7th loss in the last 8 weeks. The XRT which was having trouble with the very round 50 number is now trying to stay above its 50 day SMA and the JETS ETF, which is somewhat illiquid, is flying at a low altitude off 11% from most recent 52 week highs.

Sectors:

  • Technology was in focus Wednesday as the group delivered courtesy of AAPL. The XLK was the best major S&P performer rising .6%, outdoing healthcare and financials which rose .2%. The ETF however has CLOSED in the lower half of the daily range the last four days. It has barely made back one third of the losses of 3.3% from 7/27-30 the last couple days, a meager showing. To add to the negative narrative volume has been soft Tuesday and Wednesday, compared to the bloated volume as the fund lost ground Monday and last Friday. The 70 number that was rough resistance in March and May is your line in the sand.
  • Energy lagged as the XLE fell by 1.5% battling to stay above its 50 day SMA. Since undercutting the important line on 6/15 it has bobbed above and below the line. It has been tough to judge, and I have been getting more bullish on the space and could very well be wrong. Until 79 is taken out on a CLOSING basis I think you have to lean bearish. One still has to overcome the bearish engulfing candle on 5/22, the bearish shooting star from 7/10 and Mondays doji candle followed up by Tuesday bearish engulfing candle. Perhaps there will not be a crude awakening to the upside.

Special Situations:

We are big believers in confirming prices, most importantly on a CLOSING basis. The round number theory is also a favorite and the chart below has both. In our Friday 7/27 Game Plan this is how we profiled PTC, a best in breed software name. It was on the verge on breaking above a bullish ascending triangle formation whose trigger aligned with the very round par number. However the 100 figure was never taken out on a CLOSING basis and has since fallen 8% off most recent all time highs. Those who purchased trying to front run the trigger have payed a price. It is now nearing a gap fill from the 6/8 session. If that should hold one could enter there and add to through a potential double bottom trigger of 99.96. Those pesky round numbers are something.

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