Group Overview:
As we pointed out last week energy has been one of the worst acting major S&P sectors, regardless of the recent timeframe. In fact on a 3 and 6 month look back period it IS the worst behaved. Those trying to pick a bottom have been fruitless in their success, and rallies should continue to be sold. Of course there will be countertrend rallies, but they are tricky to navigate, even for the most seasoned market participants. To make matters worse, seasonality is not on the side of the bulls either as December is rare to CLOSE the month higher from where it began in recent years (chart below). To pile on the negativity I had a coffee with a salty energy veteran today, and he highlighted the fact that there is most likely no Santa Claus rally this year as many traders will sell their losers for tax purposes in the arena to offset the winners (if there were any is a big IF). In reality that makes perfect sense to trend followers as well, as they primary goal is to sell weakness and buy strength.
Solar Percolating:
Last week we discussed that solar charts were beginning to take on a better complexion. The TAN ETF is looking for a sixth consecutive weekly CLOSE above the very round 20 number. That level doubles as 50 day SMA support, and a gap from 11/2 was successfully filled recently. Below is the chart of RUN, the third largest component in TAN, and a legitimate handle was formed this week as it must be at least 5 days in duration. A peek on its weekly chart shows nice consolidation dating back to the week ending 7/20, which recorded a bearish engulfing candle at all time highs. Just prior to that the stock screamed higher 16 of 22 weeks ending between 2/16-7/13 traveling from 5 to 16. The week ending 11/30 jumped 18% in the best weekly volume in 3 months. The chart has a sunny disposition, pun intended, and enter with a buy stop above a cup with handle trigger of 15.10.
Examples:
Names in soft groups that tread water while the rest of the space bleeds, can often be the first out of the gate when the area eventually turns around. Below is the chart of DK and how it appeared in our Energy Report from 11/28. The stock is now higher 4 of the last 6 weeks, and they have been volatile. All 4 of the advancing weeks CLOSED in the upper half of the weekly range with three of them gaining 5% or more (to be balanced and fair the two declining weeks fell by 7.2 and 5% ending 11/23 and 12/7). This name has not been a leader as it still sits 35% off most recent 52 week highs, but PRICE action is constructive. This week is up better than 6%, and a possible bullish engulfing candle awaits depending on Fridays finish. On its weekly chart there is something for the bulls and bears, as the naysayers will claim bear flag, while optimists see a fledging double bottom base being carved out. Bringing the time frame in, the round 40 number has been a nuisance with 5 days since the beginning of November above 40 intraday, but it was unable to CLOSE above any of them. Wednesday put an end to that streak with a potential move into year end near 45. Remember measured moves are often surpassed by wide margins, and those that shave off premature can leave big winners on the table.