ChartSmarter Wednesday Game Plan 5/23/18

Markets displayed bearish action Tuesday as they started with mild gains and went out hard upon lows for the session. The Dow and Russell 2000 were the biggest losers each falling .7% and the Nasdaq and S&P 500 retreated a more blandish .2 and .3% respectively. The Dow recorded a bearish engulfing candle at the very round 25000 number today and the leading Nasdaq has now failed the CLOSE in the upper half of its daily range for 4 days in a row. Perhaps most concerning was the bearish engulfing candle the Russell 2000 registered Tuesday at all time highs. It is still 1% above its break through the 1610 bullish ascending triangle trigger, but something to monitor closely as the saying goes things always look the rosiest at the top. The VIX added just a bit more than 1% today which I thought would have been more, but to its credit it is not moving very far away from the 200 day SMA that it now sits just underneath.

Looking at individual sectors Tuesday there was some clear bifurcation as the financials have woken up a bit with the XLK leading today advancing .6%. The ETF had the look of a bull flag breakout today, with a measured move of two handles, but it can also be viewed as attempting to move through a bullish falling wedge which has a measured move almost 4 handles. A breakout from the latter (was above intraday but needs to CLOSE above 28.50) would put it above the round 30 number, a feat it has achieved on a CLOSING basis only 4 times this (three of which were by 3 pennies or less). Utilities and technology rounded out the top three as the XLU and added .4 and the XLK lost .16%. Lagging today were the industrials as defense plays were soft including NOC LMT and RTN all of which retreated more than 2%. Energy, the only group weaker than the industrials, was the second weakest group as the XLE recorded a bearish shooting star candle near the critical 78 number. Lets see if the chart can right itself by the end of the week as bulls do not want to see the ETF pausing to long in this area like it did it December 2016 and again this January.

Internet plays have been very strong, a welcome sight as software and semiconductors have both been contributing bullish subsectors within technology. Other internet names that have acted well include GRUB, AKAM, TWTR and GDDY. Below is the chart of ANGI and how it was presented in our Friday 5/11 Game Plan. The stock is up more than 6% this week already and it did break above a double bottom trigger of 14.45 on 5/11 and it did retreat slightly but found support at its 50 day SMA. Another way to look at the chart is that it did develop a handle on its double bottom base and today could be interpreted as a break above a 14.87 trigger too. The stock is lower 7 of the last 10 weeks, but now sits just 5% off most recent 52 week highs, which should be considered positive action given the 50% gain witnessed between the weeks ending 1/5-3/9.

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ChartSmarter Tuesday Game Plan 5/22/18

Markets started the week off on the right foot Monday, although some of the indexes did finish slightly off intraday highs. The Nasdaq cam close to breaking above its cup with handle trigger near 7460, but shied away. The Russell 2000 added to its break above its 1610 ascending triangle pivot and traded HIGHER following last Fridays doji candle, which many looked at as a sign of exhaustion. It is still premature but today was a step in the right direction. Out of the 30 stock in the Dow, just two lost ground today as MRK and JNJ fell, but the bigger story Monday was the ongoing bullish move in the transports. The IYT broke above a 195 ascending triangle trigger on a CLOSING basis, which carries a measured move to 213. That would obviously surpass a cup base trigger of 206.83, but the story has to be seen in a glass half full, maybe three quarters full scenario. Rail plays UNP and NSC are near 52 week highs and a piece in the Market View section this week in Barron's caught my eye as the truckers are seeing growth like they have not seen in 30 years. Tick tock, inflation next stop?

Looking at individual groups Monday it was easy to spot the rally was broad based as all nine of the major S&P sectors gained ground. Industrials and energy led with the XLI and XLE higher by 1.5 and .1%. Rounding out the top three was technology, which the bulls welcomed as the XLK rose by .9%. Financials did not want to be left out of the mix as the XLF rose by .7% too. Staples and healthcare lagged as the XLP and XLV added .4 and .1% respectively. The XLI has advanced 11 of the last 13 sessions since bouncing precisely off the round 70 figure on 5/3. Volume trends for the ETF certainly have to improve, and bears will point the seven weeks since the week ending 2/2 have dropped 2% or more, with 5 of the 7 surrendering more than 3%. Of course BA has been a big contributor and it is nearing a 371.70 cup base trigger, and a breakout would achieve an all time high. WAB was the subject of M&A discussion as GE transportation unit is merging with it and it is nearing the very round par figure which has been resistance dating back to April-August 2015.

At some point sentiment becomes so negative on a stock that one has to put a name on its long radar. One does not simply buy on impulse however, as a catalyst is needed for entry. I personally admire stocks near 52 week or all time highs, but certain formations in technical analysis could alert bottoming situations which offer decent risk/reward. Below is the chart of GE and how it was presented in our Monday 5/14 Game Plan. It has spent the last 4 months trading sideways after a horrific downtrend, perhaps indicating sellers have exhausted themselves. The name is still 48% off most recent 52 week highs but the 15 level has been a line in the sand. There have been just 4 CLOSES above the number since falling below it on 2/5 until mid last week. It has achieved 3 of the last 4 sessions CLOSING above 15 and today broke above a bullish inverse head and shoulders formation. The measured move is not gigantic, but it could certainly surpass that. The dividend yield is still above 3%, compensating investors somewhat until the appreciation side of the equation comes to fruition.

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Round Number Theory and Small Cap Healthcare Play

Some healthcare names have been garnering plenty of respect lately. Plays in the mid and large cap space that we have profiled acting bullishly include BSX, which is now on an 8 week winning streak, its first since an 11 week run between April-June '16. More importantly it has CLOSED above a 30.03 long cup base trigger the last 2 sessions. VRX which will undergo a name change, is higher by 22% over the last 2 weeks as it builds the right side of a goos looking cup base pattern. Below we look at FATE, first how it appeared in our Thursday 4/5 Game Plan and then we take a current look.

Making a quick recapture of rising 50 day SMA very bullish. FATE is a healthcare play higher by 72% YTD and 148% over the last one year period. Earnings have been mixed with gains of .6 and 2.9% on 11/2 and 8/15 and losses of 5.2 and 1.2% on 3/6 and 5/16. The stock is on a current 4 week losing streak down by 30% in the process and this week is higher by 7.6% thus far (to be fair it went on a tear going from 4 to 14 the weeks ending between 12/15/17-3/2 so being 27% off most recent 52 week highs presents an opportunity. On its weekly chart it did hit a rough double top in the 13/14 area the weeks ending 3/28/14 and 3/9/18. Enter FATE on todays recoup of the very round 10 number here.

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ChartSmarter Monday Game Plan 5/21/18

Markets ended the week with a slight whimper as the Nasdaq and S&P 500 fell .4 and .3%. The Dow finished UNCH and the Russell 2000 led with s slight gain of .1%. For the week the Russell 2000 was an outlier UP 1.2%, while the Dow and S&P 500 fell .5% and the Nasdaq by .7%. On a YTD basis the Russell 2000 has nearly caught the Nasdaq as it has advanced 5.9% compared to the Nasdaq rising 6.5% (the Dow is UNCH and the S&P 500 is up 1.5% on 2018). The Nasdaq was not helped in any way by some of their "old tech" darlings as CSCO sank nearly 6% for the week, it largest weekly loss in more than a year. AMAT plummeted more than 9%, and it already recorded an 11.3% weekly slump the week ending 2/9. Trade topped more than 100 million shares for the week, just the fourth time that occurred in the last 30 months. It is now in bear market mode and 21% off most recent 52 week highs, and one look at its chart shows very loose and sloppy trade, a hallmark bearish trait. The $TNX did back off some to end the week and it may be in for some further weakness as it completed a bearish evening star pattern.

Looking at individual sectors Friday it was energy and financials that lagged, with energy taking a well deserved day off as the XLE fell by .7%. The financials were the worst performer as the XLF surrendered .9%. The ETF put up a nice 5 session winning streak between 5/4-10 but volume was paltry. The chart has the look of a bull flag or even a bullish falling wedge, but I have no interest in participating unless 28.50 is taken out on a CLOSING basis. The bulls did enjoy seeing the staples lag as well on Friday as the XLP fell by .6%. What should have come as no surprise was CPB falling after an earnings release. It has done so now FIVE straight times losing 12.4, 3.2, 8.2, 8.1 and 2% on 5/18, 2/16, 11/21, 8/31 and 5/19/17. On a weekly basis energy led with a 1.8% gain, bulls are going to want to see them pass the leadership baton soon. They were closely tailed by materials as the XLB jumped 1.7%, recording its first 3 week winning streak of 2018. The only major S&P sectors to fall this week were the financials, technology and utilities with the XLF, XLK and XLU losing 1.1, 1.4 and 2.8% respectively.

Healthcare has been an inconsistent group recently and we have been stressing the medical device names have been the way to go, and that has been moderately correct. Below is the chart of JNCE and how it appeared in our Friday 4/27 Game Plan. There is no way to mince words. We were WRONG, and that is part of the business. No matter how good a chart looks one has to realize when a stop is hit it is game over. For those who disregard the rule of taking small losses it could be painful both in mental and physical capital. This chart was holding a great looking breakout above a long bullish ascending weekly triangle, but on 5/9 the stop was hit. For those that did not adhere to their discipline the name has been nearly sliced in half over the last 2 weeks and is a good example of the saying "nothing good happens under the 200 day SMA".

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ChartSmarter Friday Game Plan 5/18/18

Markets turned modest gains into small losses Thursday, yet once again the Russell 2000 which is often seen as a leading indicator led advancing .55%. It is often said in technical analysis circles that the best breakouts tend to work out right away, and the follow through witnessed today after Wednesdays break above an ascending triangle is certainly encouraging. One could make the argument that when trade talks make headlines in the press, like they did today, investors are bringing their capital back home where the Russell is domestically focused. The other major three benchmarks finished neat the UNCH mark. For the week heading into Friday all three of the aforementioned benchmarks are lower, marginally so, with the Nasdaq and S&P 500 down .3% and the Dow by .5%. The Nasdaq is looking for its first 3 week winning streak since the February correction, so that could be a nice psychological boost if it can manage a gain tomorrow of .4% or better. Talking about breakouts working out in a prompt fashion the ten year edged ahead again Thursday after the bull flag breakout, yet todays spinning top candle may see a pause in the move northward.

Looking at individual groups their was some clear bifurcation as energy which just does not seem to want to stop drilling higher, pun intended. It was the best acting group by a long way, as the industrials were the runner up as the XLI rose modestly by .4%. The XLE was higher by 1.5%, where technology and utilities lagged with the XLK and XLU falling by .5 and .8%. I never discredit PRICE action but perhaps the group is getting somewhat frothy here just from the standpoint the some real laggards have been on a tear. Take CHK for example which is still 27% off most recent 52 week highs, but has rallied by a third of its value this month alone. The cyclicals were hurt somewhat today as the XLY lost .3%. The largest component in the ETF AMZN continues to shy away from the round 1600 number and HD the second largest member sits in correction mode 11% off most recent 52 week highs. It has the look of building a handle on its cup base, but is doing some NOT in the upper half of the cup which makes it faulty prone.

The XLE has been all over the headlines and deservedly so, as it now hovers near either the triple top or on the verge of a major breakout from a bullish ascending triangle nearly a year and a half old. Their have been many that have led, some have been left behind, and some that never joined the party. Below is the chart of CRZO and how it appeared in our Thursday 5/10 Game Plan. To be frank it is well off all time highs, unlike some that are trading near there, but its chart shows some nice traits. It did break above a cup base trigger this week of 25.20, and looks well on its way to extending its winning streak to 8 weeks as it is higher by more than 9% heading into Friday. For Elliott Wave enthusiasts it may be in the middle of a third wave higher, which overwhelmingly is the strongest. It has more than doubled in the last 8 weeks and although I am not a believer in mean reversion this name is playing catch up nicely.

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