ChartWatchers Newsletter logo

April 2019

ChartWatchers

3 Reasons Why Semiconductors Are Poised To Lead

by Tom Bowley

Okay, let's start with the short-term reason.  Throughout much of this bull market, the month of May has been kind to semiconductors ($DJUSSC).  In fact, the DJUSSC has advanced in each of the last 7 years during May.  Check out this seasonal pattern: Not only have semiconductors moved higher during May, but they have scorched higher!  Their average May return of 7.1% over these past 7 years more than doubles any other calendar month.  Go away in May?  I think not! Next, consider what drives the stock market higher.  I'd be Read More 

ChartWatchers

Successfully Trading Stocks After They Report Earnings

by Mary Ellen McGonagle

In my ChartWatchers article from two weeks ago, I provided insights into signals that your stock may be poised to report earnings above Wall Street estimates. Given that the markets are currently rewarding positively reporting companies with an average 2.1%+ boost in price* (and in many cases, much more), you may want to review my article here. That said, there’ve been enough major earnings-related blowups this week that could easily temper your appetite for buying stocks right before earnings.  These include Irobot Corp (IRBT) which has plummeted over 23% since reporting, as well as Read More 

ChartWatchers

Five Trendlines You Should Be Watching

by David Keller

My process is built around simplicity. I am of the firm belief that investors, as well as the financial industry as a whole, tend to unnecessarily complicate things. As a result, we are led to believe that we need to track an endless number of data points to have a proper situational awareness for the markets. In reality, we need to work smarter, not harder. A small number of selectively prioritized and appropriately meaningful data points are all a savvy investor needs to get a fairly accurate read on what’s happening out there. When a chart is in Read More 

ChartWatchers

The SPY/EFA Ratio Completes an Inverse Head-and-Shoulders

by Martin Pring

Editor's Note: This article was originally published in Martin Pring's Market Roundup on Wednesday, April 24th at 7:03pm ET. Yesterday’s all-time new high in the S&P was well documented by the media, but what did not receive any attention was the fact that the SPY also reached a new high-water mark relative to the MSCI Europe Australia Far East ETF, a.k.a. the rest of the world. You can see that from Chart 1, where the ratio has broken out from a consolidation reverse head-and-shoulders. The RSI looks a little overstretched, but that does not necessarily translate into weakness Read More 

ChartWatchers

All Eyes On The Mighty Greenback! This Is How It Looks On A Relative Rotation Graph

by Julius de Kempenaer

A lot of eyeballs are watching the USD these days. Not surprisingly, as a lot (or most) people pay attention to the chart of the USD index ($USD), which compares the USD to a basket of other currencies. That chart now seems to be breaking out - to the UPside, that is. The reason for watching the "Dollar Index" is that there is no such thing as the price of "the USD," just like there is no price for the British Pound or the Euro. Currencies are always expressed "in another currency," meaning the price of the USD expressed in Pounds is different than the price of Read More 

ChartWatchers

Insurance Companies Are Popping To New Highs

by Greg Schnell

Across the broad spectrum of insurance companies, the life insurance industry group has a group of names huddled at or around 52-week highs. With nice strong dividends, these stocks look set to surge. A good example to look at is Manulife Financial (MFC). MFC currently has its highest SCTR ranking in over a year, while its PPO, which shows momentum, has moved into positive territory. This move started just recently in March and has continued into April. The Full Stochastic continues to reside in the strong area above 50. Notice the drop downs on the price chart Read More 

ChartWatchers

Five 5G Technology Stocks to Ponder

by Erin Swenlin

5G is the next generation of mobile broadband and will eventually replace (or augment) your 4G LTE connection. With 5G, we should see exponentially faster download and upload speeds. All eyes are now turning toward the companies that will help launch the advent of this exciting technology. I picked out five stocks that looked interesting in this new space. Corning Inc (GLW): I decided to go through these five on a short-term and intermediate-term basis. GLW has been struggling with overhead resistance, but, with the new PMO BUY signal, it Read More 

ChartWatchers

Profiting from Companies that Beat Earnings Expectations

by John Hopkins

Earnings season is off and running and already some companies that beat expectations could set up as high reward-to-risk trades. JP Morgan (JPM) is a perfect example of a company that reported stronger than expected numbers; you can see below the positive response from the market below. In the week since JPM reported its numbers, the stock has risen by 8.7% and has moved closer to testing the September 20-21, 2018 highs. It could still get there, but it's now technically overbought and this is certainly not a good time to chase. Instead, for those who are patient it makes more sense Read More 

ChartWatchers

Railroad Stocks Lead the Transports and Industrial Sector Higher

by John Murphy

Editor's Note: This article was originally published in John Murphy's Market Message on Friday, April 19th at 10:21am ET. Two stock groups did better than the rest of the market this week. Transportation stocks had another strong week. As did the Industrial Sector SPDR (XLI) which was the week's strongest sector. Both have one group to thank for their strong performance. And that's railroads which are included in both groups. And the rails have become market leaders in both. Chart 1 shows the Dow Jones US Railroad Index climbing this week to a new record. The rails have been the Read More 

ChartWatchers

Here Are The Industry Groups Flying Into Earnings Season

by Tom Bowley

Analysts routinely visit management teams of public companies to see how their quarters are progressing.  Based on the knowledge they gain, they return to their offices and their firms issue recommendations to buy or sell.  It's the reason that we do what we do.  By analyzing price action, we begin to get a feel for which areas of the market we're likely to see a rapidly improving earnings environment.  To that end, I'd suggest taking a look at the following groups based on their recent relative outperformance: The green shaded area shows that each Read More 

ChartWatchers

An Aggressive Projection for the Dow

by David Keller

Have you ever played devil’s advocate in a group discussion? That's the situation where everyone comes to one conclusion, so you take the opposite side just to provide an alternative hypothesis and argue its merits. We often avoid this sort of “outside the box” thinking because of confirmation bias. Once we’ve decided we’re bearish, we assign greater importance to any new bearish evidence because it supports our predetermined thesis. One way to combat this is to play devil’s advocate with your own process. Once you’ve drawn a conclusion, force yourself to Read More 

ChartWatchers

Global Stocks Join Global A/D Line Above Key Trend Lines

by Martin Pring

Editor's Note: This article was originally published in Martin Pring's Market Roundup on Tuesday, April 9th at 1:08pm ET. Global stocks, represented in the form of the MSCI World Stock ETF (ACWI), peaked in January of last year and gradually worked their way lower into late December. However, a remarkable turnaround has enabled the price of this ETF to complete a 6-month inverse head-and-shoulders and crash through its bear market trend line. In addition, Chart 1 shows that my Global A/D line has completed a 12-month consolidation pattern and broken out decisively on the upside. This Read More 

ChartWatchers

Trading Stocks Before They Report Earnings - Tips to Improve Your Success Rate

by Mary Ellen McGonagle

Earnings surprises can move a stock substantially, leading to either huge gains or big losses in your portfolio. Today, I’ll be reviewing how you can trade during earnings season to your benefit.  There is no single absolute way to do this; rather, as you’ll see, it will depend on your willingness to put the work in before a company reports. For those of you more averse to the inherent risk of buying into the release of earnings, I’ll be reviewing profitable ways to trade a stock after it reports in my next ChartWatchers article (2 weeks from now!). Before we Read More 

ChartWatchers

EARNINGS: 2018 Q4 Finalized; S&P 500 Still Overvalued

by Carl Swenlin

S&P 500 earnings for 2018 Q4 have been finalized, and with a P/E of 21.4, the market is above the normal value range and very overvalued. The following chart shows us the normal value range of the S&P 500 Index. It shows us where the S&P 500 would have to be in order to have an overvalued P/E of 20 (red line), a fairly valued P/E of 15 (blue line), or an undervalued P/E of 10 (green line). There are three hash marks on the right side of the chart to show where the range bands are projected be at the end of 2019 Q4. If earnings estimates hold and price doesn't change Read More 

ChartWatchers

When Tails Remain On One Side Of A Relative Rotation Graph, What Does That Mean?

by Julius de Kempenaer

Relative Rotation Graphs are a great tool to use to visualize sector rotation, along with other asset rotations in various universes. If you have used RRGs regularly and have monitored multiple rotational patterns, you may have noticed that the rotations do not always travel through all four quadrants in sequential order. Understanding what happens in these situations will help you to read and better understand Relative Rotation Graphs. Typical Rotational Pattern The usual rotation on a Relative Rotation Graph Read More 

ChartWatchers

Materials Sector (XLB) Bursts Through Resistance with Confirming LT Buy Signal

by Erin Swenlin

While I maintain the DecisionPoint Scoreboard for the large-cap SPX, OEX, NDX and Dow, Carl maintains a DecisionPoint "Sector" Scoreboard. On Friday's DecisionPoint show (which airs Fridays at 4:30p EST on StockCharts TV), Carl and I pointed out that the Materials sector triggered a new LT Trend Model BUY signal. Interestingly, the signal came on the heels of a significant breakout. The only two sectors left with SELL signals are XLE and XLF, which have both been reluctant to accelerate off of December lows at the same rate as many of the other sectors. Read More 

ChartWatchers

Earnings Season Can Produce Real Sizzle

by John Hopkins

As earnings season gets ready to kick off this week once JPM, PNC and WFC report their results on Friday, here's a reminder that those stocks that come up big on the top and bottom line could ultimately become high reward-to-risk trading candidates, possibly multiple times. There are many examples of this from last quarter, but one stock that stands out as worthy of examining is Trade Desk (TTD). Starting with the initial boost from its earnings report, TTD rose over 30% after posting its numbers, then almost 19% when it pulled back to test its 20-day moving average, then Read More 

ChartWatchers

RSI Shifts from Bearish to Bullish for EEM

by Arthur Hill

The Emerging Markets ETF (EEM) experienced a trend-momentum shift over the last few months as RSI moved from its bear range to its bull range. In addition, RSI came close to 70 (69.5) twice and EEM broke above its 200-day SMA. The downtrend reversed and I expect higher prices until the evidence proves otherwise.   The chart below shows EEM falling into October 2018 and then firming in the last two months of the year. EEM actually showed some relative strength from October to December because it forged a higher low when SPY forged a lower low. This is partly due to strength in China Read More 

ChartWatchers

Foreign Stocks are Now Rising

by John Murphy

Editor's Note: This article was originally published in John Murphy's Market Message on Thursday, April 4th at 4:16pm ET. Much of the concerns over the past year have centered around weakness in foreign stocks, and whether that would eventually pull U.S. stocks lower. The general feeling seemed to be that sooner or later the discrepancy between strong U.S. stocks and weak foreign stocks would have to be resolved one way or the other. That meant that U.S. stocks would have to weaken, or foreign stocks would have to strengthen. Right now, it looks like the latter is the case. In other Read More 

ChartWatchers

Can Autos Accelerate Without Tesla?

by Greg Schnell

The auto charts are a mixed bag. For the last few years, they have had trouble outperforming; even Tesla (TSLA) has been dead money for buy-and-holders. However, it's starting to look like the broader group wants to start running; below are a few charts of interest. Tesla sits at the low end of the multi-year range. While the Tesla chart is definitely the most volatile automaker, it does not mean that the rest of the group can't go higher. If Tesla is going to keep bouncing off the lows, that is definitely bullish.  We also had a nice 3-month high on Ford (F). Ford has a lot of Read More