Finnies Swimming Upstream:

  • The group has come into vogue recently, as the XLF is the second best major S&P sector over the last one week period, and the fourth strongest over a one month look back period (on a YTD basis it is just the seventh best out of the 11, but has advanced more than a very respectable 18%). The exchange names have been giving the overall space a boost, and some select insurance names are still hanging strong, although CINF did record a bearish engulfing candle Monday. Interestingly V MA and PYPL all suffered robust declines today, but were made up on the firmness of the traditional banks like C JPM BAC and GS all of which rose between 2-4%. 

High Yield Predicting Bull Move?

  • Of course it would be foolish to look at the financial sector without discussing bonds and interest rates. The negative yield chatter has been deafening in recent months, and perhaps may have exhausted itself. The TLT did form a nice bull flag formation, but was unable to break above it on the daily, and the WEEKLY chart produced back to back spinning top candles which are adept at signaling if not a change in the prevailing trend at least a pause. Conversely he TBT was unable show any downside follow through after the ugly three week losing streak that slumped 21% between the weeks ending 8/2/16. Below is the chart of an instrument many look at as a "risk on" factor of the HYG. It suggests markets may have some room to run.

Examples:

  • In the example section each night in our daily note, we like to show how an idea became profitable. Today we will show how we were WRONG, which will happen frequently, but the key is tight stops to limit the damage. Below is the chart of LPLA and how it appeared in our 8/8 Financial Note (we have done just a couple finnie reports in the last 6 weeks, as we did not see the need to do so). On 7/25 the stock recorded a bearish dark cloud cover candle at the very round 90 number. That predicted some tough times ahead, which did materialize. We highlighted a buy at the near the rising 200 day SMA at 74. Our stop happened to be too taut, and the stop was triggered. The round 70 number ended up comforting the drawdown a couple times in August. The name is now on the mend and approaching the round 80 number as the right side of a potential cup base takes shape.

Special Situations:

  • Exchange play higher by 22% YTD and 14% over last one year period. Dividend yield of 1%.
  • Still digesting big run gaining 49 of 65 weeks ending between 11/4/16-1/26/18. Broke above WEEKLY double bottom pivot of 115.21 week ending 8/2.
  • Solid action among peers with CBOE CME and NDAQ within just 2-4% off most recent 52 week highs.
  • Enter with buy stop above bull flag pivot of 120.25. Break carries measured move to 136.
  • Entry CBOE 120.25.  Stop 115.

  • Consumer finance leader higher by 51% YTD and 28% over last one year period. Dividend yield of 2%.
  • Up by a combined 8% last 2 weeks, and off to fast start this one up 5% on Monday.
  • FOUR consecutive positive earnings reactions higher by 6.5, .2, 5.7 and 2.3% on 7/18, 4/18, 1/30 and 10/25/18.
  • Enter with buy stop above 34.33 cup base pivot.
  • Entry ALLY 34.33.  Stop 32.

  • Payment name higher by 9% YTD, but lower by 32% over last one year period.
  • Down 5 of last 7 weeks, and 2 gainers CLOSED in lower half of weekly range. Last 3 week all CLOSED very taut within just .22 of each other. That type of action often leads to explosive moves.
  • 3 of last 4 earnings reactions down sharply by 14, 8 and 9% on 8/2, 5/2 and 11/8/18.
  • Sell stop to short below bear flag pivot of 59.75. Break carries measured move to 38.
  • Entry SQ 59.75.  Buy stop 63.

Good luck.

Entry summaries:

Buy stop above bull flag pivot CBOE 120.25.  Stop 115.

Buy stop above cup base pivot ALLY 34.33.  Stop 32.

Sell stop to short below bear flag SQ 59.75.  Buy stop 63.

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