The Canadian Technician

The Fabric Of Fiction - Dow Theory Using $INDU

Dow Theory. Is it as robust as the chair on the left? Is the current reality a Dow Theory failure to confirm? Perhaps its a distorted reality. I have given up on Dow Theory using $INDU as a timing tool. Here's why. The start of Dow Theory was by Charles Dow and his interpretation was if the transports price action diverged from the industrial companies, we have a problem till resolved. Well, the game changed long ago on the Dow Industrials. The current name of the Dow Jones Industrials Average couldn't be more misleading. You won't find American Express (AXP), JP Morgan (JPM), Goldman Sachs (GS), Travelers Co, (TRV) and Visa (V) in the Industrials sector but you might find them in the financials. You won't find Disney (DIS), McDonalds (MCD), Walmart (WMT), Procter and Gamble (PG), Johnson and Johnson (JNJ), Home Depot (HD), Nike (NKE) and Coca-Cola (KO) in Industrials but you will find them in Consumer Cyclicals or Consumer Staples. Verizon (VZ) is best described as a telecom or a utility, not an Industrial. You might find UnitedHealth (UNH), Pfizer (PFE), and Merck (MRK) in Healthcare,  not Industrials. I have always looked for Exxon Mobil (XOM) and Chevron (CVX) in Energy. Then we have stocks like Microsoft (MSFT), Apple (AAPL), IBM (IBM), Cisco (CSCO) and Intel (INTC) that are Technology not Industrials. Good ol' Dupont (DD) is a Materials Company, not Industrials. That leaves me 3M (MMM), Boeing (BA), Caterpillar (CAT), General Electric (GE) and United Technologies (UTX) in Industrials. 

Continue reading "The Fabric Of Fiction - Dow Theory Using $INDU" »

Blackberry (BB.TO, BBRY) Traders Reach The Fulcrum Decision Point

For one of Canada's most storied stocks, Blackberry (BB.TO, BBRY) continues to write new story lines. We can see three major setups in Blackberry.  The pattern as Blackberry failed at the top is shown, but the SCTR ranking was dismal in 2010. The same consolidation is occurring now, but this time, Blackberry is one of the top 25% in performance based on the Toronto SCTR ranking. This is an important distinction because the Oil and Gas as well as materials are very low ranking. This means that BB.TO is doing well compared to the rest of the Canadian stocks, but in this case, the rest of the stocks are not doing so well. The real decision for investors is approaching.  If this breaks up and out, this will be an important entry. If Blackberry can not accelerate from here, the $10 level would mark the lower boundary of a sideways consolidation.

Notice the MACD going to sleep on the chart. It has been flat lining for 2 years on the big picture (weekly 10 years) with almost no emotion. The zoom box shows a slight upturn but not a weekly bullish cross yet. Sitting just above zero, this would be a great place for Blackberry to find support and move higher.  

The US Version of the chart is a little different. First of all, the SCTR in this ticker is compared to the Mid-cap stocks as shown in the Full quote screen at the top. With BBRY only at 40.2 it is still one of the lower performers. I wanted to illustrate the difference in the SCTR. You can not compare SCTR rankings between different groups.  The price action of BBRY is very similar inside the red boxes. The same viewpoint I expressed on the Canadian chart above holds true here on price and on the MACD. 

Blackberry really needs to show some power here if it is going to change the long term trend. There is lots to focus on, but this would be the time to show acceleration.

I have started to tweet a little more (@schnellinvestor), so if you follow Twitter, I hope to post some timely charts there. I also will try to link articles or webinars through there to help you understand what I think about the markets from my lens. Tomorrow is webinar day for me (every Thursday at 4:30 EDT) and we have lots to cover. Martin Pring will join me and we will probably continue the format we tried May 14th. Two presentations, then an open dialogue about the charts. The previous one was well received, so my plan would be to continue that style. Feedback on blogs and webinars is greatly appreciated. Click here to register for Tomorrows Webinar. Thursday May 28th Webinar.

If you would like to subscribe to the blogs to receive an email or use an RSS feed, the subscribe box is top right. 

Good trading,
Greg Schnell, CMT.

Canadian Financials Muddle Along

The Canadian Financial Sector ($SPTFS)  continues to hover in the middle of the trading range for the last year. It is currently trading where it was last July. In the Month of May, the financial stocks have started to underperform the $SPX which I use as a reference point because the S&P 500 has so many industry groups to stabilize it. The $TSX is 1/3 banking, so as the Canadian banks go, the $TSX follows closely. The other 2/3 are energy and materials, which are both in terrible shape. So showing banking outperforming those two groups would not help us. Using the $SPX as the pivot point does a better job.

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Encana (ECA.TO, ECA) Misses The Memo

Encana, (ECA.TO, ECA on NYSE) widely considered one of Canada's powerhouse companies, just can't seem to get the mojo going. When Encana separated out the Oil related exploration and production into a distinct company called Cenovus, it was a difficult process to watch. The mother company, Encana, was solely focused on Natural Gas revenues and struggled as Natural Gas made fresh lows.

Photo - Copyright © Encana Corporation. All rights reserved.

As we watched the Natural Gas company suffer through years of poor price performance on the stock, investors have thrown out management, changed senior company execs and planned for better things ahead.  When Natural Gas finally crawled back above $3.00 after hitting 3 year lows of $2.47 a few weeks back, I was optimistic we might start to see some follow through on price in the Natural Gas related companies. Encana has started to diversify again into the oil business as the realization of being gas only was clearly a difficult road. So Encana is still one of the big dogs in the business and I thought that would be a chart to smile at. 

Just to help compare, let's start with the chart of Natural Gas ($NATGAS) that I presented on the webinar yesterday. You can see the last few weeks have been rising nicely. Look in the zoom box on the right.

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Trican (TCW.TO) Workover Gets Fracked

Trican Well Service (TCW.TO) announced earnings today. The company described a stunning change in business which could threaten the debt covenants as soon as this fall so the management stopped the dividend this morning that was introduced in 2006. The picture below from the Trican website identifies the businesses that they are involved in. They also have excellent videos on their website explaining the processes in the energy business generally. 

The oilfield service industry group is really in a bind. 

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Canadian Health Care Sector Needs To Be Watched Closely Here

I am a big believer in the relative strength line. This week the SPURS as I like to call it, is sitting at an important junction and so is the price. We can see the SPURS shown in purple has broken through support and is backtesting the trend line. The price is testing the 8 month trend line off the October lows. The big volume is concerning. Could this be a final exhaustion move? In the last 30 trading days the pop in volume has been significant. With all that volume you would not expect to underperform.

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An Industrial Metals Stock Up 37% In A Week!

The gold miners had a big day yesterday, but the mining sector has been moving across more than just gold.

Here is the chart for Hudbay Minerals (HBM.TO). They are involved in zinc and copper with some gold and silver. This is a nine month breakout and is threatening the 52 week highs.

Here is First Quantum Minerals (FM.TO). 

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How I Use The StockCharts.com Home Page - Part 3

In the previous two articles, I covered off the value of the ticker cloud, the popular symbols link, the Market Summary and Sector Summary. Part 1 Link.

In the second article I covered off the SCTR ranking system and the Decision Point Links. Part 2 Link.

Now we are going to roll through the six pack grid that highlights what's moving. That section has the smell of money rolling through it! I will also finish the last two pieces on the Golden Line which are the MarketCarpet and the PerfCharts.

The grid on the home page has an immense amount of information hidden in it. This is not something to drive by. In just a few clicks you can see what is moving across the exchanges!

Continue reading "How I Use The StockCharts.com Home Page - Part 3" »

How I Use The StockCharts.com Home Page Part 2

This article continues where How I Use the StockCharts.com Home Page Part 1 left off. You can access that article here.

Let's go back to the Golden Line. I want to dig into the SCTR rankings. To me, this is the single most useful method for identifying strong stocks. I find it stronger than many of the other systems. It does not reflect any fundamental valuation metric. It simply measures price movement in the stock. All of my poorest trades result in using any fundamental analysis. As soon as I get involved fundamentally in a stock, I let pullbacks become problems. I find SCTRs to be way more powerful for finding the best.

So let's dig in to the SCTR Reports. For Canadian investors, this is one of the best tools to rank Canadian stocks. When you start the reports, it is important to notice the drop down box at the top to select your favourite tool. If you are not sure of what is really strong at any time, find the stocks behaving the best by ranking them in SCTR rank regardless of industry or sector.  Again, the SCTR does not change based on intraday, daily, weekly or monthly, so the second drop down box is not as valuable on this page for the static value. However, you may want to find the fastest moving SCTR's intraday or end of day depending on your timeframe. I left it on intraday in the current example and I have sorted by volume to demonstrate that all the columns are active.  Canadian investors can select the Toronto stocks for the Canadian rankings.

Continue reading "How I Use The StockCharts.com Home Page Part 2" »

How I Use The StockCharts.com Home Page Part 1

Have you ever driven through an Automated Teller Machine (money machine) at the bank and forgot to take your cash? Driving past the home page can be similar in importance. The next few articles will cover quick ways to use the home page. One thing I'd like to point out throughout this series of articles is how to find Canadian data quickly as well. Whenever there is a special link to some Canadian data, I'll point to it. Lets start near the top. First of all, the little chart top left is one of the fastest ways to see what is going on in the market. If you click on the tabs, you can see the chart of each market, denoted by point 1. You can also click on the table links shown at point 2 immediately below the chart to see those markets in chart form as well. The Canadian market can be viewed from the tab at the top of the chart or the $TSX line in the table below the chart or in the "consistently popular" ticker symbols to the right of Point 2.

Continue reading "How I Use The StockCharts.com Home Page Part 1" »

The $SPX Chart Indicators That Suggest Rough Times Ahead

Coming back from the Market Technicians Association conference in NYC with a rampant number of things to review. Truly a fabulous event with so many technicians in the room. Let's just say the conversation is a little more technical than most. However, the chart that came to me in the first presentation from Tom Dorsey about volatility was to go look at something I had done a few years back. If volatility picks up before a market breaks down we should see that. The Average True Range (ATR) indicator is a simple volatility indicator. The $VIX tends to generate too many signals, so we'll pick the simplest form of volatility.

When we are in a bullish trend we are not looking for bottoms. We are looking for rare signals that might help define a top. My first thought on Thursday was the ATR. Sure enough, it is giving a rare signal on a weekly $SPX chart. More importantly, there are no real false signals. All of the pullbacks were meaningful. However, the indications from 1999 suggeststhe band can play on for a while before the index sinks in a meaningful change in trend. This is also a value derived from price so as price moves higher this may need to have a higher signal level. I'll write that in English! 41 points per week on the ATR is a bigger percentage of 1576 (2.6%) than it is of 2119. We would need to see the ATR at 55. That being said, the normal volatility between 30 and 40 worked for most of the last 3 years. When I see the large ATR base in 2004, 2005, 2006 and compare that to the base of 2012, 2013, 2014 they look similar. By any standard we have broken well above the base. 


Chart 1

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$NATGAS Continues To Stall

$NATGAS still looks to be building a basing pattern, but the start of a new uptrend has been a long time coming. I mentioned this right at the end of yesterday's webinar, but I don't think the recording caught all of it. I was expecting Natural Gas to start turning up well over a month ago. The trade continues to be waffling around here. The losses are still manageable, but its frustrating when the planned trade stalls. Here is the chart. 

While the consolidation continues, the price action broke below the up sloping support line. The MACD has rolled over at the zero line which is a bearish development. Perhaps we'll need to see $NATGAS test the $2.56 low again. The trade has not worked here in a reasonable amount of time, so it might be better to sit back and wait, rather than leave it at risk here. Thursday's low might just be testing where the stops are, but the MACD crossover so close to zero can't be a positive in terms of momentum. Time to watch very closely and have a plan in place.

Good trading,
Greg Schnell, CMT