Monthly Archives: August 2024

Consumer Group Strength Broadening: The XRT, the more diverse consumer discretionary ETF, is signaling good things for the group. Below is the MONTHLY chart which shows this could be ready for a beach ball held underwater breakout. It would have to climb above the round 80 figure first but if that occurs look for this fund to target the very round par number by the end of 2024. It shied away from that level in late 2021, which was the start of an ugly 8-month losing stream that found a floor in the 55 area which it held during 2022 and 2023. When compared to the top-heavy XLY on a ratio chart the XRT recorded a nice last 3 weeks of July and is now bull flagging for a possible continuation move higher. This to me speaks volumes as money may have been rotated out of the AMZN's and TSLA's and into the smaller names as the group's ascent spreads its tentacles wide (not saying TSLA and AMZN will not power higher from here). Its daily chart could hit a roadblock as it travels toward the 79-80 area for the sixth time in 6 months, or is that too obvious to occur again? The fund did complete the bullish island reversal on 8/15 (after the gap down on 8/2) and this coiling action could be ready for a charge higher.

Getting "Charged Up"? The EV space has been one that has been disappointing in sales figures overall and yet the daily chart below of TSLA seems to be ignoring this. That is a good sign and last week made some technical progress which is all we care about, and it is making its move as its flamboyant CEO seems to make headlines on a daily basis, which in the past has affected the stock. Perhaps bulls are looking past this noise and we flagged the potential weakness after the WEEKLY spinning top candle the week ending 7/12 after a furious sprint higher in PRICE. Some may interpret this as a WEEKLY double bottom with handle base but the handle has formed to low in the pattern. Against domestic rival RIVN, which was acting well nearly doubling in PRICE off the very round 10 number completing a bullish morning star on 6/24, it looks again like it wants to take on a leadership role (see ratio chart here breaking above 3-month downtrend). Its MONTHLY chart shows huge potential as it carves out a symmetrical triangle/bull flag. Notice how the doji in November 201 called the top and the bullish piercing line in January 2023 at the very round par number the bottom. 

"Chip" on Its Shoulder:   The old dilemma of whether to buy a leader or a former general? An analogy I often like to paint is investors should supply their portfolio with "all-stars" rather than triple AAA players in pursuit of a World Series. Some names need to take a rest, or a prudent pause before they start a fledging uptrend. A former good-looking semi-play in ON and its WEEKLY chart below could be ready for the promotion to the big leagues. A couple of weeks ago produced its third consecutive positive earnings reaction up 11.5% on 7/29 and on the daily chart there are some green shoots with Thursday seeing a third break back above its 200-day SMA, since early July, and it is ignoring a prior bearish island reversal with the gap down on 8/2 (after the gap up on 7/26). You can almost feel the bear's exhaustion of trying to push this name lower and are most likely looking elsewhere for shorting opportunities. Notice too on the ratio chart how it has been outperforming an already firming semiconductor group. Use a CLOSING stop below 72 if one takes the play.

Taking the Other Side:   I am not going out on a limb here stating that we are in a very volatile seasonality period and coming off a big run it makes sense to maybe take some rapid gains off the table. My trading style is longer term, but in times like these technical analysis comes in handy, where one can shave around core positions and wait for nearer the Q4 period where it would make sense to hold more patiently. Below could be a good example of that with the chart of META. Almost all I speak with are on the long bandwagon and I am happy to take the other side of the trade. Of course, if the 540 level is taken out on a CLOSING basis I will lick my wounds and move on to the next opportunity, but I think this is ripe for a tactical short. This is classified as a communication services play but has a profound impact on technology and just looking at the daily chart below notice the very wide and loose overall trade, a hallmark bearish trait. Its MONTHLY chart shows it may be tiring a bit, and with good reason following a 15 of 16-month win streak, not a typo, after a bounce off the very round par number in late 2022. Since then we had a bearish evening star completed in April, a spinning top in July, and a possible hanging man so far in August (all circled). The weight of the evidence suggests a prudent pause here and some give back before a late 2024 run higher.