Don't Ignore This Chart Blog Archives

November 2017

Rising Treasury Yields Signal Two Things

There's a renewed selling effort in U.S. treasuries and that's sending yields soaring.  Bullish performance in small caps, transportation stocks (especially railroads), financials, industrials and consumer discretionary are painting a picture of a strengthening economy ahead and the selling of treasuries would certainly support that theory.  With the FOMC meeting less than two weeks away, it's apparent that the bond market is anticipating another rate hike at the conclusion of the meeting.  Traders are also pouring into financial stocks, particularly banks ($DJUSBK), as yields rise:

The breakout of the continuation symmetrical triangle pattern suggests we'll see further increases in the yield as we approach the FOMC meeting and with those higher treasury yields, I'd look for more money rotating into financial stocks.  The positive correlation between the 10 year treasury yield ($TNX) and the direction of bank stocks is rather obvious and I'd expect it to continue into December.

Happy trading!

Tom

Cybersecurity ETF (CIBR) Breaks Out To New Highs

The cybersecurity ETF (CIBR) broke out to new highs late last week. The chart shows a couple of downtrends also breaking. In this vertical market where everything is up, a stock that consolidates sideways for any length of time looks pretty weak. The SCTR has a downtrend line that looks to be breaking. An SCTR above 50 would mark new 4-month highs. 

The relative strength downtrend also broke so there might be more to this breakout. The move to new highs on the price chart after a consolidation sideways since March is very bullish. 

Continue reading "Cybersecurity ETF (CIBR) Breaks Out To New Highs" »

KLA-Tencor Traces out Two Continuation Patterns

KLA-Tencor (KLAC), a semiconductor equipment and materials designer and manufacturer, is in a long-term uptrend with large and small bullish continuation patterns working. The chart shows 52-week highs in May and October so the long-term trend is clearly up. The green outline highlights a cup-with-handle forming from June to November. On the right side of this pattern, we can see a sharp advance from August to October and then a pullback in November (blue lines). This pullback looks like a falling flag, which is also a bullish continuation pattern. A break above the mid November high would end the flag and signal a continuation of the August-October advance. A break above the prior highs would confirm the cup-with-handle and be even more bullish. Also notice that the indicator window shows MACD turning up near the zero line. 

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Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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Timken Surges off Rising 200-day SMA

Timken (TKR), a mid-cap industrial, looks like it is resuming its bigger uptrend with a surge off the 200-day SMA. The chart below shows the stock hitting 52-week highs in April and October. The October high formed after a channel breakout and 25% advance. Timken then corrected with a rather sharp decline and briefly broke the 200-day SMA last week. This break, however, did not last long as the stock surged back above 47 the last five days. Also notice that MACD turned up and moved above its signal line. The long-term trend is considered up because of the 52-week highs and the recent MACD crossover suggests that the short-term downswing reversed. Thus, it looks like the long-term trend is resuming.  

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Thanks for tuning in and have a great day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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MGM Tries To Breakout Again

The gambling stocks have performed well over the last few years. MGM has traded sideways while WYNN has continued to climb. The consolidation looks constructive as MGM tries to breakout again. The RSI in the top panel continues to bounce off the 40 level which is a bull-market trait.

Continue reading "MGM Tries To Breakout Again" »

TJX Companies Reverses with Big Spinning Top

Retail stocks surged last week and discounter TJX Companies ($TJX) bounced off support with high volume. Technically, the big trend is still down because the 50-day EMA is below the 200-day EMA and TJX is below the 200-day EMA. These EMAs are not shown on the chart to keep it clean.

Despite the overall downtrend, TJX looks promising from a bullish standpoint because it reversed at support on big volume. Notice how the stock formed a massive spinning top after last week's gap down. The spinning top shows indecision because the open and close are in the middle of a large high-low range. Basically, prices gapped down with an open at 67.60, fell further with a dip to 66.44, bounced with a surged to 69.59 and ended up near the open with a close at 67.94. There was a whole lot of pushing and shoving during the day, but not much change from open to close.

Indecision can lead to a directional change and TJX reversed course with a bounce the next three days. This bounce off support is impressive because it occurred with high upside volume on two of the last three days. Also note that competitor Ross Stores (ROST) hit a new high and discounter Big Lots (BIG) broke out. 

Follow me on Twitter @arthurhill  - Keep up with my 140 character commentaries.

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Thanks for tuning in and have a good day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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Nike, Skechers Lead Rally In Footwear Stocks

Skechers (SKX) rallied approximately 40% after its most recent quarterly earnings report and Nike (NKE) has gone from 2017 lows to nearly a 2017 high in the past five weeks, highlighting a significant rally in the Dow Jones U.S. Footwear Index ($DJUSFT).  The DJUSFT rallied 3.21% on Friday alone and is on the verge of a very significant breakout:

The DJUSFT is heavily weighted toward NKE and you can see that in the chart above.  NKE's major price resistance level is 60 and a breakout with confirming volume would be extremely bullish for the entire industry group.

Happy trading!

Tom

Western Digital Breaks Out of Continuation Pattern

Western Digital (WDC) appears to be emerging from a consolidation pattern and this increases the chances of new highs in the coming weeks. The chart shows WDC hitting a new high in July and then falling with a rather sharp decline into early August. The stock immediately rebounded after this decline, but then traded sideways as a triangle formed. This triangle is basically a consolidation within an uptrend and a breakout means the bigger uptrend is continuing. Note that the 50-day EMA has been above the 200-day EMA for over a year now. WDC struggled to break the triangle trend line in late October, but buying pressure increased over the last six days as the stock edged above the August high. A resistance breakout is in the making and this means WDC is poised to challenge its July high. 

Follow me on Twitter @arthurhill  - Keep up with my 140 character commentaries.

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Thanks for tuning in and have a good day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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General Electric Short Circuits (GE)

General Electric (GE) has been struggling recently and now the stock dipped to two years lows. For such a blue chip institutional stock, the price action faltering while the overall market is in a big bull trend is almost shocking. With the investor day, GE announced asset sales and a dividend cut. The investors short circuited and hammered the sell button. While all this is new, the real question is when will investors find the stock low enough that good value is showing up?

The stock has been dead money for 20 years. For an institutional stock, this price action is horrific. It will force investors to trade this stock rather than hold it for long term accumulation.

That said, at some point it becomes a buy. Usually we need a cathartic, apocalyptical volume to remove all the weak holders of the stock. A short term chart will help as the monthly bars are just too big and they can mask the data. There are a couple of common indicators that can help. We want to see the volume return to less than normal as the selling dries up. This should also give us a slightly higher low as the volume dries.

Without question, this was a cathartic flush. The only good news is that this should mark some sort of a major low in the stock. The next few days should confirm a trade-able low in the stock. A bounce out of here should be good for a trade with a stop just below Tuesday's low. But it probably also suggests the return of the long term hold in GE is not likely any time soon.

Good trading,
Greg Schnell, CMT, MFTA

Fortinet Bids to End Long Correction

Stocks close to new highs are usually in uptrends and have a good chance of recording new highs in the near future. Fortinet looks poised for a new high as challenges a channel line after an upturn last week. First and foremost, Fortinet is in a long-term uptrend with the 50-day EMA above the 200-day EMA and a 52-week high this summer. The stock peaked in early July, but has been pretty much flat since June with the blue lines marking a correction. Corrections can sometimes overstay their welcome by extending longer than we expect. Nevertheless, I try to keep the bigger picture in mind and set my bias based on the bigger trend. The bigger trend is still up and this means I still view the slight decline marked by the falling channel as a correction within a bigger uptrend. There are signs that this correction may be ending because the stock surged above 40 in October, fell back in early November and turned up the last seven days (purple outline). A channel breakout could be in the making and this would signal a resumption of the prior advance (late December to mid May).  

Follow me on Twitter @arthurhill  - Keep up with my 140 character commentaries.

****************************************
Thanks for tuning in and have a good day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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Want To Know When To Sell? Terex Is A Perfect Example

In September, Terex Corp (TEX) saw big volume accompany a breakout of a bullish rectangular consolidation phase.  After weeks of trending higher, momentum began to slow and TEX printed a "death" candle - a shooting star on big volume to end the uptrend.  If there's one signal that screams at me to sell, it's the combination of a negative divergence and a reversing candle on volume.  Look at the chart below:

Continue reading "Want To Know When To Sell? Terex Is A Perfect Example" »

Proctor and Gamble (PG) Prints An Outside Reversal

Procter and Gamble (PG) printed an outside reversal this week right near the lower Keltner channel line. While the chart of Proctor and Gamble is trending higher, it's always important to find a nice entry. This week fits the criteria with a couple of indicators drawing our attention.

First of all, this is typically as weak as PG gets compared to its peers on the SCTR indicator. Secondly, the full stochastic dipped below 20 and looks set to rise here. Most of the signals off the full stochastic were profitable. On the price panel, the reversal was right near the lower Keltner channel. A Keltner channel is a great place to look for large-cap SP500 stocks to bounce if they are going to continue the uptrend. If the trade does not work, a stop just below can protect capital.

The volume and the MACD are both worth checking. After two big selling weeks on the zoom panel, PG looks like its finding buyers at prior support ($85). The volume last week showed an low volume low after two high volume weeks.  The price closed to flat, indicating the selling momentum was stalling. This week the outside reversal looks firm, closing well above last weeks high.

Continue reading "Proctor and Gamble (PG) Prints An Outside Reversal" »

Selling Allows PNC Financial To Unwind For Solid Reward To Risk Trade

While it would be great for the stock market to rise every day without any selling whatsoever, that's just not practical.  As a trader, I await episodes of selling to set up much better reward to risk trades in stocks that remain in long-term uptrends.  Enter PNC Financial (PNC).  On October 13th, PNC reported revenues ($4.13 bil vs. $4.11 bil) and EPS ($2.16 vs. $2.13) that beat Wall Street consensus estimates and that's helped PNC lead the banking group higher.  But the selling the past few trading sessions has now set PNC up as a potential trade:

Slowing price momentum was evident on the most recent high closes as the MACD had turned lower.  That sets up a potential 50 day SMA test (pink arrow), which it accomplished with today's weakness.  This also coincides with recent price support tests at this very level as well (green arrows).  PNC is also testing its relative support (blue arrows) at a time when its RSI has dipped just beneath 40.  RSI 40 normally provides solid support during uptrends and, with the exception of early September, has been doing so for PNC as well.

All of this leads me to speculate that PNC will move higher from here.  A quick upside target would be 138-139, while a closing stop could be considered beneath 131.50 to minimize downside risk.

Happy trading!

Tom

Fiserve Shows Resilience with Move into Gap Zone

Fiserv gapped down and fell on big volume last week, but the candlestick points to an accumulation day and the Accumulation Distribution Line hit a new high. First and foremost, the big trend is up because Fiserve hit a 52-week high with a move above 130 in late October. FISV then gapped down with an open around 124 and closed lower on the highest volume of the year. Despite the lower close, I think this was an accumulation day because the stock dipped below 121 during the day and closed near the high of the day. This candlestick looks like a massive hammer and the ability to close near the high of the day shows accumulation. This is reflected in the Accumulation Distribution Line (ACDL), which surged to a new high on this reversal day. Check out the ChartSchool article to learn why? I will give you a hint. This indicator measures the close relative to the high-low range to measure accumulation and distribution. Given the bigger uptrend, the hammer and follow through over the last few days, I would expect Fiserve to continue its uptrend and record a new high in the coming weeks. 

Follow me on Twitter @arthurhill  - Keep up with my 140 character commentaries.

****************************************
Thanks for tuning in and have a good day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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Schlumberger Springs a Bear Trap with Big Volume

Schlumberger (SLB) broke support with a surge in volume, but this support break did not hold as the stock surged with strong volume the last two weeks. The decline below 62 looks like a selling climax because of high volume and the gap down. The surge in volume flushes out of the sellers and paves the way for a bounce. SLB got its bounce with a two week surge that exceeded the 50-day EMA today. Notice that volume was above average five of the last nine days. I am not counting today's volume because the day is incomplete. Despite early signs of a bottom, the overall trend remains down with resistance marked in the 69-70 area. A breakout here is needed to fully reverse the long-term downtrend. 

Follow me on Twitter @arthurhill  - Keep up with my 140 character commentaries.

****************************************
Thanks for tuning in and have a good day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
*****************************************

IBM Fails To Hold Moving Average Support, Now Looks To This Key Level

IBM has been a very interesting stock to watch, but not to own.  After 23 consecutive quarters of declining revenues, traders finally found something to be excited about in IBM's latest quarterly earnings report.  Five years ago, IBM traded near 165.  At Friday's close, it was approaching 150.  Big Blue has been an even bigger disappointment.  In its earnings report on October 17th, however, IBM beat its revenue estimates by nearly a half billion dollars and its EPS edged out estimates by two pennies.  That was enough to light a fire under its stock price as it jumped from 146.54 at the close prior to earnings to 157.12 the next morning.  It proceeded to hit 162.51 before skidding backwards the past couple weeks.  Here's the chart:

Continue reading "IBM Fails To Hold Moving Average Support, Now Looks To This Key Level" »

S&P 500 in nose bleed area? ... Not from this perspective!

The Relative Rotation Graph above plots a number of world equity markets against the FTSE all-world index and shows their relative rotation around this benchmark.

With all the chatter going around on the S&P 50o index camping in the nose-bleed area this gives a refreshing angle to look at the current state of world-affairs (at a stock market level that is ..).

The markets on the right, inside the weakening quadrant, are Hong Kong ($HSI), Emerging Markets ($MSEMF), and China ($FTX). If you click on the chart and open the live version you can scroll back through time and see how these markets started to improve over the US, Japan, and Europe, one by one starting in April.

Despite a 23% rally for China and 18% for Hong Kong over the past 30 weeks, everybody is talking about SPY ($SPX), up "only" 9% over the same period, being overstretched...

The RRG above shows that, from a relative point of view, the US, Japan, and Europe are far from overstretched. They started improving over their more emerging counterparts recently and especially the Japanese Nikkei index and the S&P 500 are rapidly heading towards the leading quadrant and likely to take over the leading role in world equity markets.

The Relative Rotation Graph above is, therefore, a chart that should not be ignored.

Please note that I am using the underlying index ticker symbols ($....) on the RRG and NOT the ETFs representing those markets. Read this old blog post related to this issue explaining how ETFs and their underlying indices can be completely different animals...

 

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Julius de Kempenaer | RRG Research
RRG, Relative Rotation Graphs, JdK RS-Ratio, and JdK RS-Momentum are registered TradeMarks by RRG Research

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Ford Stalls before Making Next Move

Ford (F) consolidated after a big advance and this consolidation looks like a bullish continuation pattern. First, industry group strength and the long-term uptrend are in Ford’s favor. Ford is part of the red-hot Global Auto ETF (CARZ), which is up over 20% from its April low and trading near a 52-week high. Long-term, Ford broke a big resistance zone in September and the 50-day EMA moved above the 200-day EMA in October. After a 19% -trend-reversing advance, the stock was entitled to a rest and this is exactly how a consolidation works. The trading range digests the gains, alleviates overbought conditions and paves the way for the next move.  A break above the October highs would end the consolidation and signal a continuation of the August-September surge. The consolidation sports a higher low over the last few weeks and also looks like a small ascending triangle. 

Follow me on Twitter @arthurhill  - Keep up with my 140 character commentaries.

****************************************
Thanks for tuning in and have a good day!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
*****************************************

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