Douglas Busch

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.

"Healthy" Hazard: The diverse healthcare space on a YTD basis is trading right in the middle of the pack up 10%, fifth best among the 11 major S&P sectors. A solid, yet pedestrian move as some rotation continues into defensive areas into the teeth of the summer doldrums, which of course as we know tend to be volatile. Below is the longer-term WEEKLY look at the XLV and it has something for both bull and bears although they must favor the former as a nice uptrend is in place. The naysayers will claim that it is not distancing itself from the breakout area above the bull flag, as we know the best breakouts tend to work right away and act well POST breakout. The XBI MONTHLY chart continues to be repelled at the very round par number, but give it credit for breaking ABOVE a bearish head and shoulders formation, and we know from FALSE moves can come fast ones in the opposite direction. Notice too it has formed a bull flag with the trigger right at pesky 50 MONTH SMA resistance. This overall sector should perform well as it has something for most investors. Conservative ones will clamor the dividend and maturity, and those looking for some growth could add exposure to the biotechs.

Industrial Strength Ahead? As defensive rotation continues in the markets with real estate, utilities, and healthcare the top three major S&P sectors over the last one-month period, the industrials are in hot pursuit rising almost 3%. Seasonality is interesting with the XLI as notice the first 6 months of the year average an UNCH return essentially, but the second half of the year brings in the volatility, but once Q3 is in the rearview mirror, Q4 shines. September is the outlier month in the last 4 years down almost 6% with ZERO months CLOSING above where they began. Looking internally one of the best subsectors within has been the railroads, which do question the recession ramblings. NSC has been acting the firmest and now sports a bull flag pattern, which started with a successful retest of a break above the downtrend. A break above the 245 pivot carries a measured move to 270 in the near term. Of course, on the flip side, CNI has fallen 15 of the last 20 weeks. Stock selection is crucial and XLI bulls want to see the daily chart of the ETF start to trade a bit tauter. But looking under the sector surface shows some emerging leaders.