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ChartSmarter Friday Game Plan 3/2/18

Markets were torpedoed Thursday as the Dow gave back more than 400 points or 1.7%, the Nasdaq slipped 1.3 and the S&P 500 gave back 1.3% too. The Russell 2000 which did demonstrate some early strength was unable to avoid the softness, but showed some relative strength lower by .3%. Volume was strong showing the fingerprints of big institutions lightening up on positions. Keep in mind the weakness came in conjunction with a pullback on the 10 year yield as well, often a good sign for equities. On a weekly basis the Dow has fallen 2.8% headed into Friday (3 of the last 4 weeks have advanced or declined more than 4%), the S&P 500 is lower by 2.6 and the Nasdaq by 2.1%. The headlines will blame Powell, the tariffs, etc. but the benchmarks have felt heavy now for a month and when we see the sharp declines that we witnessed early on in February, it is usually not the only stumble and those that missed the initial bounce can usually count on better prices going forward, that being lower. The aforementioned big three major indexes are all looking like they will record bearish engulfing WEEKLY candles, unless their is some real strength Friday. The VIX continues its impressive week as today broke above a bullish falling wedge, although CLOSING well off highs.

Looking into it was a rush into the laggard defensive groups with the utilities finishing ever so slightly in the green, and the XLP lost .4%. Energy which has had plenty of its own struggles was the second worst actor with the XLE off by .2%. Being hit the hardest near the tune of 2% were the financials and industrials. The financials gave up its 50 day SMA support for the second time this month, which is very often a poor scenario. If one wanted to do some Monday morning quarterbacking you could say the rebound in the middle of February was accompanied by very soft trade. As we have stressed many times before the very taut action in the XLF for more than a year has now become wide and loose, hallmark bearish characteristics. There is nothing wrong with taking some money off the table here and waiting for the dust to clear.

Discretionary names have been on a roll overall, but some retail names have been battered around lately. LB took a plunge below its 200 day SMA today and is now 33% below most recent 52 week highs. Of course you have perennial laggards like BBBY, GIL or a GME. One must focus on names that are shrugging off the weakness in February and the sector too. Below is the chart of TPR and how it appeared in our Wednesday 2/7 Game Plan, the old COH or Coach and to be honest I abhor name changes but this one has worked out well so far. If you compare its performance to the XRT it is just 3% off most recent 52 week highs while the ETF is 9% off its. It is holding above the 48.90 cup with handle trigger it broke above on 2/6 and is also looking for a third consecutive weekly CLOSE above the very round 50 number.

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ChartSmarter Thursday Game Plan 3/1/18

Markets concluded the volatile month of February in a bearish way as they fell hard into the end of the session Wednesday as the Dow and Nasdaq slipped below their 50 day SMAs (the good news is we are heading into the best two months historically for the markets). Both of these indexes can now be viewed as bearish rising wedges breakdowns which aligned with the 50 day SMAs (keep in mind a lot of stops are hit just above and beneath this line). The leading Nasdaq is still above its 50 day SMA by 1.5%, but the weight of the averages certainly has some forgetting the powerful rally that ended just two days ago. The Russell 2000 not only broke further below its 50 day SMA losing 1.6% today but fell below its bull flag breakout from this Monday and we know the best breakouts tend to work out right away. The VIX which we spoke about yesterday tested its 50 day SMA, and also went deep into yesterdays bullish engulfing candle and ultimately produced a bullish hammer. Its CLOSE above the very round 20 figure today, something it has done just twice in the previous 9 days since falling below it on 2/14, should have the bulls losing some sleep.

Looking at individual groups there was no hiding, but it was the cyclicals that behaved the "best" lower by .5%, following through after yesterdays 2.1% slump on heavy trade. The XLK fell .7% and is showing some negative signs with the bearish dark cloud cover candle Tuesday, and also followed through after Tuesdays softness and the ETF is also having issues with former highs after such a rapid recovery near the round 70 number. Lagging was the energy group as the XLE fell by 2.2% as the greenback gets a bid. It is now down 3% heading into Thursday and it feels heavy as it has had time to recoup some of the 14% combined losses the weeks ending 2/2-9, but has been reluctant to do so. It is a bit premature but any more weakness will have the 50 and 200 day SMA starting to slope lower. The XLV traveled back below its 50 day SMA, and has now CLOSED above its 50 day SMA just 3 times since undercutting the line on 2/5. That makes it now twice in this month it quickly fell back below it, a red flag.

As technicians we believe PRICE tells us all we need to know. Fundamental information and everything else one can think of is baked into the cake. And after all we are paid and judged by price action, so why not focus entirely on that. I have yet to hear of any traders being paid on anything other than P&L. Today Herbalife rose powerfully more than 6% after Bill Ackman reported he gave up on the short. PRICE however was acting well BEFORE this revelation. Was the strong volume and superb movement in the stock supported by his covering over time? Who knows, and who cares. Below is the chart of HLF and how it appeared in our Wednesday 2/14 Game Plan. The name traded very taut, a hallmark bearish characteristic, and acted well POST breakout from a cup base trigger of 79.74, another positive as the best breakouts will work often right away. It now trades just 5% off recent all time highs. That is something long shareholders could digest, pun intended.

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ChartSmarter Wednesday Game Plan 2/28/18

Markets sold off Tuesday with the Nasdaq falling 1.2% and recording a bearish engulfing candle. This is the index of importance and many wondered what would happen as it approached former highs. It was the first to reclaim its 50 day SMA and the other major benchmarks followed, so perhaps it backing off will frighten the S&P 500 and Dow somewhat. The Russell 2000 retreating back underneath its 50 day SMA just one day after recouping it is not a good sign and we spoke last week about the VIX retesting its cup base breakout trigger near 15, and today it did so very firmly at its rising 50 day SMA rising more than 18%, a very good sign for product. One group not getting much conversation has been the weakness in the homebuilders. Of course the threat of higher interest rates is not friendly to the space, but there have been some outsized losses within. Names including DHI LEN MTH and TMHC are lower between 19-20% from most recent 52 week highs nearing bear market territory. The ITB has made little progress with any strength following the selloff earlier this month and has behaved very poorly following a bearish engulfing week ending 1/26. The ETF put on an impressive streak higher 18 of 21 weeks ending between 9/1-17-1/19 before it recent softness. Even periphery plays have been noticeable laggards with TTS and JELD off by 76 and 24% respectively.

Looking at individual groups there was very little for the bulls to talk about. The selloff was broad based with the financials acting the best with the XLF CLOSING lower by 1%. It came near the round 30 number, a level which has seen only 4 CLOSES above recently and is a level which gave the fund headaches dating back to the spring of 2007. The lagging energy space with the XLE is trying for a third consecutive up week with the last 2 trading in a very narrow range and well within the confines of the 8% weekly slump ending 2/9. Today the ETF was rejected at the round 70 number where it had problems climbing above last November and early December too. Near the bottom of the leaderboard were the staples and utilities with the XLP and XLU dropping 1.3 and 1.6% respectively and the worst performer on the session was the cyclicals falling a tidy 1.6% via the XLY recording an ugly bearish engulfing candle.

We are big believers in relative strength and therefore we must be on weakness as well. We have seen a big move off the recent lows and it could be a potential red flag if a stock did not participate. Price reveals plenty of information and below is a great example with HOG and how it was presented in our Monday 2/26 Game Plan. The first thing we see is the stock is underneath its 200 day SMA, and the saying is nothing good tends to happen below that secular line. The line is also sloping lower and that should make one hesitant on making long entries. It did little in the way of attempting a rebound and that demonstrated shortcomings. The stock is now 28% off most recent 52 week highs and looking at its potential first 3 week losing streak, down 2.2% so far this week, since August of last year. It is now flirting with the breakdown trigger and keep a close eye on this name to see how it responds following the possible breakdown.

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ChartSmarter Tuesday Game Plan 2/27/18

Markets screamed higher Monday and the beginning of the week has been very strong on both the upside and downside. The Dow for example fell 4.6% on 2/5, on 2/12 rose 1.7%, on 2/20 fell 1% and today rose by 1.6%. The Dow was a big winner today as it easily outshone the other major indexes with the Nasdaq and S&P 500 advancing 1.2%. The Russell 2000 gained .6%, finally CLOSING above its 50 day SMA which has plagued the benchmark and also broke through a bull flag formation of 1550 which has a measured move of 110 handles. It was surprising that the Nasdaq did not outperform as the semiconductors where one of the best industry actors today with the SMH up 2%. Transports were firm, and the averages were helped along with the 10 year yield dropping for a third straight session, something it has not done since the beginning of last November. On its weekly chart the TNX recorded a bearish doji candle the week ending 2/16 followed up by a shooting last week. It has the potential to retest a cup base breakout trigger in a year long pattern just above 2.6% in the first half of this year.

Looking at individual groups it was technology and the financials that led, with both the XLK and XLF rising in the 1.5% neighborhood. The XLK has now fully recovered all of the big losses from the steep correction in the rapid 5 day period in early February. Many have been saying this will be the critical retest once the former highs are retested. It will be interesting going forward the rest of the week to see how the sectors behave. As far as a technical entry on the XLK the cup base trigger of 69.29 has a V shape to it which has been known to be failure prone. The industrials rounded out the top three, and the XLI is higher 10 of the last 11 sessions and is now 3% off its most recent 52 week highs. It is narrowing in on the round 80 number where it recorded a bullish 3 week tight pattern the weeks ending between which all CLOSED within just .97 of each other. Lagging Monday were the utilities and materials as the XLU was the only of the major 9 S&P sectors to lose ground today. It was rejected at a heavily sloping downward 50 day SMA.

Recent new issues are always a good place to mine for potential winners for a variety of reasons. They are often under followed, except for the underwriters who tend to promote them after the quiet period is over, ad quite frankly many like to avoid these situations until a proper base has formed. IPOs tend to trade wide and loose as liquidity is often an issue, so if one can identify a stock that tends to trade somewhat tighter a possible winner can be uncovered. One name that fits the bill is OKTA, and below is the chart and how it appeared in our Wednesday 2/21 Game Plan. It is a cloud play that came public in the spring of '17 and looks like it is headed for a double as it has advanced 7 of the last 9 weeks and broke above a 33.74 cup base trigger that began the week ending 9/15/17 and was taken out the week ending 2/16 which was higher by more than 20% (the week ending 2/9 lost 1.5% CLOSING in the upper half of the weekly range as the Nasdaq plummeted more than 5%). Accumulate on any low volume pullbacks.

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Past and Present View on SF

The financials are a key sector and markets are somewhat dependent on the robust group to continue any ongoing rally. The have been subject to headlines as of late with interest rates as everyone seems to be keeping a keen eye on the 10 year as it has been hovering near the 3% level, although it has backed off last Thursday and Friday. Today we will take a look at a few different timeframes on SF, which has plenty of peers in the investment brokerage group holding their own including IBKR, PJC, RJF and MC. Directly below we see how I profiled the name in our Thursday 12/14 Game Plan and then further along in the post we take a present look on its daily and monthly charts.

Stocks that can be bought as they take out bull flag formations are SFSF is a finnie play higher by 18% YTD and 16% over the last one year period and sports a small dividend yield of .7%. Earnings have been mostly higher with gains of 2.5, .4 and 3.5% on 10/31, 8/1 and 2/1 and a loss of 2.5% on 5/2. The stock is on a current 3 week winning streak up nearly 14% in elevated volume. It has acted well POST breakout from a 56.72 cup base trigger in a pattern 9 months long and on weekly chart one can see how the round 60 number was tough to break through as it was resistance dating back to weeks ending 6/12-26/15. Enter SF with buy stop above bull flag trigger of 60.50 which carries a measured move to round 70 number.

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