Inverse Heads And Shoulders Running Wild:

Looking over hundreds of charts a day, one gets a good feel of what is going on in specific groups. Patterns develop, and it is not necessary to act on them, but you can get a good temperature as to what direction a class may head in. I was curious to see several beaten up consumer names that are sporting inverse head and shoulder formations. There is nothing to do here, just an observation. But they have traded sideways for since late May, and that should be viewed somewhat bullish as bears have had plenty of time for them to follow through to the downside, and have been unable to do so. Names that should be included in this discussion are FL KSS and GPS. I am far from a bottom feeder (prefer to buy strength), and these names are all about 40% from most recent 52 week highs, but these are valid reversal patterns. 

“Dividend Cut” Coming Soon To A Theater Near You:

Of course the headline is just humor and conjecture, but beware of investing in names that sport big dividend yields. In some cases if it is a utility, REIT or any other bond proxy type it could be understood. But most times it is perilous, and the capital depreciation far outweighs the dividends. Below may be a good example of that with the chart of AMC. It sports a dividend yield of more than 8%, but currently trades 54% off most recent 52 week highs. Certainly it recorded a very nice run from the rough round 10-20 numbers in late ’17-late ’18, and perhaps it will find support near a triple bottom at the 9 number. But with competitors like DIS and NFLX now 12 and 31% off their most respective yearly peaks, there are probably better fish to fry.

Examples:

The huge elephant in the consumer space WMT, of course the other being AMZN, is acting very well as of late. It has nearly doubled since acquiring Jet.com back in 2016, and looking at a comparison on its main rival Walmart is acting handsomely. The stock is higher by 28% YTD and 23% over the last one year period, while AMZN has advanced 15% YTD and is DOWN 8% over a one year look back period. Below is how we profiled WMT in our 10/7 Consumer Note, and one can see the nice action POST breakout from the recent cup with handle breakout (we know the best breakouts tend to work right away). It is hovering right at all time highs, and a break above the round 120 number, could unleash another big move to the upside.

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