Providers Providing Relief: With an almost incessant banter revolving around the biotechs, some sub groups are flying under the radar. The healthcare providers have been showing some nice quiet strength up 8% YTD, and the ETF sports a nice dividend yield of 4%. The fund has traded between the very round 150-200 numbers for the last 13 months, and now shows a bullish inverse head and shoulders formation. The chart looks very similar to top component UNH, which makes sense as the name makes up 23% of the ETF. CVS, the number 2 holding reports earnings before the bell Wednesday, and recently broke above a bull flag pattern. ANTM has the look of a beachball being held underwater as trades narrows just below its 200 day SMA. CI is riding a 5 week winning streak, and looking to break a string of lower highs on its WEEKLY chart. Rounding out the top 5 components is CNC, which looks attractive as long as it does not trade too far below the very round 50 number, which would be a failed gap fill. The IHF has run as of late, but still trading 12% off its most recent yearly peak suggests the rally could have legs. Sleepy Giant Roused? With most investors short term memory, it is often good to revisit a big market moving event once the noise calms down. Below is the chart of BIIB, and it is not hard to see something significant occurred on 10/22. The earnings reaction was obviously robust jumping 26.1%, but not much chatter has been delivered since. There is something for bulls and bears to take away from the set up, with the optimists stating that it is for the most part holding its gains after the big ramp up, and it still trades 14% from most recent 52 week highs. The pessimists will see stalling with some bearish candlesticks. Peer AMGN recorded a bearish engulfing candle Monday at the round 220 number, but overall that name is fine technically. BMY which is being acquiring CELG registered a bearish counterattack candle last Friday, and has as much distance between it and its 50 day SMA in quite some time. I would however be a buyer of that name on weakness, as it has advanced 12 of the last 15 weeks. GILD has been dead money for sometime. Let's dig in deeper to BIIB. Recent Examples: In the recent uncertainty surrounding the new issue market, some names have remained resolute. The stock below is about to turn 2 years old this week, and has shown nice resilience. Below is the chart of APLS, and how it appeared in our 10/30 Healthcare Note. It broke above the bull flag, and is pausing not surprisingly near an upside gap fill from the 9/11 session. On its WEEKLY chart, if going into year end it can break above a double top in the 32-33 area from the weeks ending 4/20/18 and 9/13/19, the move can be significant. The stock is looking for a 6 week winning streak depending on Fridays CLOSE, and 2 of the 5 prior gainers rose at least 8%. All of the last 5 weeks CLOSED at or near the top of their weekly ranges, a very bullish trait.
"Searching" For Answers, Pun Intended: The adage goes, PRICE has memory. And when it approaches a level where it has been previously, it may become somewhat apprehensive. The more times the area is come into contact however, that anxiety most likely diminishes. Below is the chart of GOOGL, the fourth largest component in the Nasdaq and therefore having large implications on the tech rich benchmark. For the third time since the summer of '18, it is honing in on the round 1300 number (interestingly it has received support at the very round 1000 number in that same time frame). It has work to do as the last time it touched 1300 it registered a bearish engulfing candle the week ending 5/3. But if this 1300 area can be cleared to the upside, it could join tech giants AAPL and MSFT, which have been acting very well technically (and AMZN cleared its 200 day SMA Monday). That could provide a thrust to the upside into year end and beyond possibly. On an overall technology thesis, just think how well it has held up in the midst of a software selloff. In my opinion that is just more ammunition in the bulls holster, IF the space can get going. Return Of The Hack: No one is denying the importance of software security, but the group was not always at the top of investors watchlist. HACK sits just 6% off most recent 52 week highs, and its lukewarm troubles began after it failed to break above a 3 week tight pattern the weeks ending between 7/12-26, with a 3 CLOSING within just .25 of each other. Give credit for the ETF hanging in there despite CSCO, the 2nd largest component, trading 19% off its yearly peak. VRSN another old tech play did complete its measured move to 180, after a bear flag breakdown below the very round 200 number on 9/10. But to accentuate the positive, nice earnings reports recently from FTNT last Friday, and PANW jumping 10% the last 2 weeks, the sub sector is back in vogue. Even FEYE is on a robust 4 week winning streak, and we were WRONG about that move. Perhaps it is unfair to make the comparison to IGV on the ratio chart below, with established names like TWLO and WDAY on their backs off 39 and 27% from their most recent ascents, but that does not mean one can not compliment the move of HACK. Recent Examples: Technology has been a stout actor all throughout 2019, and is looking to go wire to wire among the 11 major groups. It remains in the top spot with the XLK in comfortable control with a 10% point lead (higher by more than 38% thus far YTD ahead of second best sector the XLRE). Below is a beneficiary of the tech tailwind, and the chart of LITE and how it appeared in our 11/1 Technology Note. Last week it broke above a long WEEKLY symmetrical triangle rising 15.6%, its best weekly gain in 18 months, in the 5th strongest weekly volume in all of 2019. The longer the base the greater the space upon the breakout, so this name could potentially have plenty of room to run higher. The telecommunication equipment space has been a strong one with VIAV breaking above a bull flag last week, and look for the earnings reaction tomorrow of PLT which sports a bullish inverse head and shoulders formation with a neckline that coincides with the round 40 number.
European Banks On The Move Higher: The very diverse financial space has lots of moving parts. Of course the traditional money center banks are probably the most widely followed, but the 10 year yield is most likely a close second with their implications on credit card and mortgage rates (TNX recorded a bullish engulfing candle at its rising 50 day SMA Friday). There are the exchanges and broker dealers, and then one sub sector left for dead in recent memory were the European banks. The chart of the EUFN, shows the ETF just 7% off most recent 52 week highs, and the fund is higher by 9% YTD and sports a very slippery dividend yield of 9.7%. The WEEKLY chart of CS, a top 10 component, looks constructive, as it forms a rounded bottom pattern, with bears seemingly having no success pushing it lower this year (in 2018 it traded roughly between the round 10-20 figures). DB seems to be the outlier in the group slumping more than 7% this week, and sitting 31% off most recent 52 week highs. The EUFN looks productive on its longer term WEEKLY chart as the last 3 weeks CLOSED very taut within just .18 of each other. This type of action often leads to explosive moves once resolved. Regionals Making Their Presence Felt: The regional banks have turned higher, perhaps catching the rising tide that has overcome the financials group. What the reason or whether it is deserved or not is irrelevant, as PRICE action is speaking loudly. The chart of the KRE below shows a break above a symmetrical triangle last week, and this week witnessing mild follow through advancing more than 1%. It is a good start, and a break above the bearish engulfing week ending 8/2 that dropped 5.4% would decisively break a series of lower highs that began in mid 2018. The largest component in the ETF, FRC just broke above a 107.85 cup base pivot in a pattern 6 months in duration. Perhaps some mean reversion will develop as the KRE trades 5% off its most recent 52 week highs, while the XLF is right at its highest peak in one year. Recent Examples: Continuing the regional bank theme, below we show the chart of ZION, and how it appeared in our 10/24 Financial Note. The name recorded a move above a bullish inverse head and shoulders formation, the day BEFORE a strong breakaway gap following the most recent earnings. It took courage to enter if one did, but remember if one is a longer term investor looking to capture potential large returns, one has to put up with that four times a year. ZION registered its first four week winning streak since February-March, and is approaching the very round 50 number which has been problematic dating back to last November. A move through that level could be powerful and put it on a course to the 60 number last seen in early 2018.
Apple Of My Eye: As AAPL and MSFT flip flop between the largest trillion dollar market capitalizations, both names have had a great effect in the markets resiliency this year. On AAPL's WEEKLY chart it has acted well POST breakout from a one year long cup base pivot of 233.57, the week ending 10/11 in a pattern that began the week ending 10/5/18. Below on its daily chart I would not be surprised to see that breakout retested as it trades well above its rising 50 day SMA, and has recorded two bearish candlesticks this week near at all time highs. Today's hanging man, after its FOURTH straight positive earnings reaction, and the engulfing candle suggest at least a pause in the prevailing trend. That could mean a visit back to 50 day SMA, which happened in May and July this year (the latter held, while the former did not receive support there). If that were to occur, treat it as an opportunity. Semis Snoozy? The semiconductors continue to do the vast majority of the heavy lifting within technology these days. The SMH is higher by 46% YTD, nearly double the 2019 gain so far from the IGV which has risen a respectable 24%. The semis carry a nice advantage with yield too, as the SMH sports a dividend yield of 1.3% compared to the IGV's .1% (perhaps that is a function of investors striving for some sort of yield). The space continues to show divergence regarding recent earnings reports. We all know the disparity between some behemoths with INTC jumping, and TXN slumping. But in showing that leaders shine, results from names in firm uptrends this week witnessed CRUS and IPHI jumping 16.2 and 19.4% respectively. And laggards that saw softness include MXL and CREE which fell 15.8 on 10/25, and CREE falling marginally today but give extra credit for a nearly 20% move off intraday lows Friday. Examples: Pay special attention to names that act well on a poor tape. Below is a prime example of that, with the stock of PSTG and how the computer hardware play was written in our 10/29 Technology Note. It currently trades 17% off most recent 52 weeks, but the name is higher 16 of the last 17 sessions, and the chart trades very taut, hallmark bullish traits. It has acted well since completing a bullish island reversal this August, and has is now approaching the very round 20 number. That would be an upside gap fill from the 5/21 session, and it has been digesting big winning streaks recently (its up the last 3 weeks by 17% and this week is flat, and it jumped 30% during a 4 week winning streak the weeks ending between 8/23-913 as well). On the WEEKLY chart if the stock can keep gaining momentum a double bottom base is setting up with a potential pivot of 23.63.
Consumer Names Pointing Too Recession? The XLY over the last 6 months has more than taken a breather, it is the NINTH best actor among the major S&P sectors, barely positive. The ratio chart below shows how it has lagged the S&P 500, and that should not be surprising given 3 of the 5 top components in the ETF are in correction mode with MCD AMZN and SBUX lower by 11, 13 and 16% off their most respective 52 week highs (NKE lost more than 5% in big trade last week too). To be sure there are still leaders within the broad space, but they seem to becoming less abundant. Take former leisure winners like MTCH and PLNT, both in bear market mode, down more than 20% from their most recent yearly peaks. Autos have seen bifurcation with GM and F traveling down different routes (whatever happened to all the hype surrounding NIO). Some may say the arena is getting frothy, as stocks like JCP FRAN and VNCE have doubled or more since September. PIR did the same, but has since came crashing back to earth. As always play each individual name on its own merits, and keep losses minimal. Less Glittery: With the announcement confirmed that a bid for TIF from LVMH, that sent the stock soaring nearly 32%, some may look at the prospects of competitors. It is not something I would do, but one would expect some sort of short lived bounce of any peers. Below is the chart of SIG, which has been a laggard down 73% from most recent 52 week highs, not a typo. Bottom picking is often a troublesome journey, but it is showing a mildly positive bullish inverse head and shoulders pattern. Each day this week flirted with the 18 pivot, and it is looking weary after Wednesdays drop of nearly 7%. There are most likely better fish to fry in the luxury space, like TPR that pays a dividend yield of 5.1%, and has clung to a big 2 week winning streak of a combined 21% the two weeks ending between 9/6/13. Both TPR and SIG however still have much to prove, and one should stick to leaders in the space, as we know trends are more likely to persist than reverse. Examples: Stocks that break out, or break down, will often go on to retest the spot of the move to prove if it is legitimate. Below is an example of the latter, and the chart of ETSY and how it appeared in our 9/25 Consumer Note. The name REPORTS tonight, and it has recorded back to back double digit earnings related drops of 12.4 and 10.7% on 8/2 and 5/9 concerning, after the prior 3 all rose by 16.3, 23.7 and 3.3% on 2/26, 11/7 and 8/7/18. Notice how it not only retested the symmetrical triangle breakdown, but also filled in an upside gap from the 8/2 session, and met resistance at the 200 day SMA with all at the round 60 number. This is what is called a "cluster of evidence". The stock has dropped more than 10% this week so far, not long after a 9.3% slump the week ending 9/27. Perhaps someone knows something.