Don't Ignore This Chart

Shaking Up Coke (KO), Pepsi (PEP) And Your Portfolio

There has been some fizz in both Coke (KO) and Pepsi (PEP) as they both look to break above trend lines and prior highs. On the chart below, all the indicators are for KO shown in Yellow and you can see Coke is breaking above previous highs and the down sloping trend line. Important things to note are the SCTR ranking jumping above 75, the MACD breaking to new one-year highs, and the Relative Strength improving since the June lows. 

In the Background in Cyan, I have shown Pepsi (PEP) which recently burst to new highs, pulled back in August with the rest of the market and it now trying to bubble out the top of the chart. 

Continue reading "Shaking Up Coke (KO), Pepsi (PEP) And Your Portfolio" »

Airlines Awaiting Take Off

Airlines ($DJUSAR) have traded sideways to down most of 2015.  Yet this industry group is one of the best performers historically in the month of October.  Furthermore, several airline stocks are in bullish patterns OR are approaching key technical levels of support/resistance.  The chart below summarizes several of the charts in this group.  Technical breakouts on confirming volume should be respected, especially considering this is the time of year these stocks love to FLY.  Check out these component stocks and their technical merit:

UAL is at major 2015 price support while all of the others reflected above are in general uptrends.  Entering at support levels makes sense given the technical signs and the historical tailwinds.

Happy trading!


Monster Beverage Loses Energy as Bands Narrow

Monster Beverage (MNST) did not partake in the early October surge and a key volume indicator suggests that distribution is underway. Let's start with the price chart. MNST fell sharply in August and then firmed just above the rising 200-day moving average in September. Volatility contracted as the stock moved into a rather narrow range (137.5 to 131.5  on a closing basis). John Bollinger, creator of Bollinger Bands, theorized that a volatility expansion follows a volatility contraction and this means chartists should prepare for a move. But which way? 

Continue reading "Monster Beverage Loses Energy as Bands Narrow" »

Xilinx Holds the Gap and Shows Relative Strength

Stock market declines are good because they expose the weak hands and highlight potentially strong stocks. Stocks that hold up during a broad market decline show relative strength and this could lead to outperformance when the market turns up again. Xilinx (XLNX) is one such stock because it held up well in August-September and broke out over the last four days. 

The indicator window shows the stock relative to the S&P 500 SPDR (SPY) using a ratio plot (XLNX:SPY). Even though the stock forged a lower low in late August, the price relative formed a higher low and this shows relative strength. Well, it actually showed less weakness than SPY, which is a form of relative strength. 

After surging from late August to mid September, the stock fell back with a falling flag into late September. Despite this decline, the price relative held up and maintained its uptrend. XLNX broke flag resistance with a gap-surge on 20-September and is now poised to challenge the September highs. A breakout here would forge a higher high and signal the start of a bigger uptrend. 

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

Plan your Trade and Trade your Plan


How To Spot A Positive Divergence

In evaluating whether a positive (or negative) divergence exists on a chart, you must remember to use closing prices.  If you use candlesticks like I do, it's not always easy to spot divergences.  I'll give you an example - Baidu (BIDU).  On the chart below, the top portion is a candlestick chart and the bottom portion is a line chart.  Evaluating divergences is one of the few times a line chart is preferred.  Take a look:

On the candlestick chart, the huge gap lower and long tail to the downside produces "noise" on the chart and you may try to connect those lows with the lows made the following month.  If you do, you'd incorrectly determine that prices have not moved lower and therefore you cannot have a positive divergence.  However, the line chart - which only uses closing prices - clearly shows that we've seen lower lows in price.  That, combined with a higher MACD produces the positive divergence, which is a sign that selling momentum is slowing.  Always remember that hollow candlesticks have closes at the TOP of the rectangle.  Opens are at the bottom.  The "tails" or "wicks" mark the intraday high and low.

Happy trading!


Intel (INTC) Letting Its Chips Fall?

Actually, this chipmaker's chart looks very strong, especially longer-term.  After a strong advance in late 2014, a negative divergence emerged and was followed by a topping head & shoulders pattern.  The measurement of that pattern - from the top of the head to the neckline -was roughly 17.8%.  Once neckline support was lost, the measurement is determined by another 17.8% decline, or a drop to roughly 24.66.  Several weeks ago, INTC found its bottom at 24.87, not far from reaching that measurement/downside target.  Now INTC is rebounding and it's doing so with nice relative strength vs. its peers and at a time when semiconductors have held relative trendline support vs. the S&P 500.  On Wednesday, INTC closed back above 30.00, an important short-term resistance level but is currently trading back beneath that level today.  On this weekly chart, we need to see a weekly close above 30.00 to trigger a buy signal.  In the meantime, more short-term weakness down to test recent price support near 28.00 could suggest building a long position as well.  Have a look at this 5 year weekly chart:

Happy trading!


Corn ETF Attempts to End Wave 2 Correction

Corn is showing signs of firming near the June lows and a possible wave 2 could be ending for the Corn Trust ETF (CORN). I will first start with December Corn Futures (^CZ15) because this is the most widely traded instrument for corn. Note that StockCharts provides end-of-day (EOD) data for dozens of commodities and these symbols begin with a caret (^). Chartists simply need to search the symbol catalog for ^ to see them all. I will include an example at the end of this commentary. Turning back to corn, the futures contract surged in June-July and then fell all the way back to the June lows in August-September. It looks like these lows are holding because corn surged off the support zone in mid September. The indicator window shows MACD (12,26,9) moving into positive territory for the first time since July. 

Continue reading "Corn ETF Attempts to End Wave 2 Correction" »

The Big Dog Barks - XOM

Exxon Mobil (XOM) has been a dog since the price of oil dropped a year ago. In the 2008 bear market, Exxon was a go-to stock when everything else was cratering. Exxon (XOM) was a company that would be able to come out the other side of the GFC. Is that what is going on now or is it something different?

Exxon has surged on the SCTR rankings from the bottom third of the pack to put in the highest SCTR reading in a year. While 50 means it's just middle of the pack, it also suggests the stock is behaving better that it has been. The RS line has also broken above the downtrend which is the first sign of optimism in a year. This change in RS is demonstrating that Exxon has stopped falling while the $SPX has pulled back. 

Both the Volume and the MACD are not showing any real change either. The dividend is huge at 4% on Exxon currently. While the SCTR has jumped out of the basement and started to trend higher, I would still like to see a move above 75 on the SCTR as an entry condition for buying the stock expecting a rise in the stock price. In down markets, Exxon is an anchor for institutional investors to park money. If 2008 was a guide, the institutions didn't stay in Exxon coming out of the bear market lows as they moved to something with a faster growth rate. It currently looks like Exxon is playing a safety role as well as providing a dividend payment to wait. The fact the stock is holding up while the overall market pulls back is a good trait and the dividend helps cushion the downside. It might be a case of the best defense wins, not the best offense.

Good trading,
Greg Schnell, CMT

Biotech SCTRs Crater as XBI Breaks Neckline Support

The biotech ETFs have gone from leaders to laggards as the StockCharts Technical Rank (SCTR) plunged double-digits over the past week. The image below shows the ETFs with the biggest decline in their SCTR over the past week. You can set the time period using the drop down at the top and then sort by clicking the column heading. Also note that our ETF universe for the SCTRs does not include leveraged or inverse ETFs. As the table below shows, the SCTRs for the Biotech iShares (IBB) and Biotech SPDR (XBI) were above 95 just a week ago. We can deduce this because their SCTRs are down some 77 points and currently in the low 20s. The SCTR ranges from zero to one hundred with zero as the weakest and one hundred as the strongest. IBB and XBI are currently below 20 and this means they are in the bottom 20 percent for ETF performance. I will show the head-and-shoulders top in XBI after the jump. 

Continue reading "Biotech SCTRs Crater as XBI Breaks Neckline Support" »

Healthcare ETF (XLV) Seeking First Aid

Healthcare stocks led much of the market's rally off the 2009 lows - especially since early 2011.  That was then.  This is now.  Technical conditions have deteriorated immensely since the Spring of this year when warning signs emerged (see "Healthcare Stocks Are Vulnerable To Weakness Ahead").  Negative divergences on the weekly MACD warned us of potential momentum issues.  Now we're seeing the confirmation in terms of major support breakdowns on the weekly chart and very bearish behavior as resistance was recently tested.  Take a look at the chart:

For the first time since 2011, the 20 week EMA is pointing lower.  Worse yet is the fact that we tested that now-declining 20 week EMA on our last rally attempt and failed.  With the weekly MACD making a bearish crossover of its centerline and a failure at 20 week EMA resistance, it appears to me as if this group is heading lower over the intermediate-term, especially on a relative basis.  Look for that blue relative uptrend line to be tested in the months ahead.  That suggests to me to look elsewhere in terms of long positions in the foreseeable future.

Happy trading!


Amerco (UHAL) Is Movin' On Up To The Right Corner

Amerco (UHAL) is the parent company of U-Haul. We have all seen them or used them driving our stuff across North America. The stock has had a very important consolidation that is not unique.

The stock has been on an unbelievable up trend off the 2009 lows. At this point it is up almost 2000 % off the 2009 lows. Earlier this year it went into an extremely flat consolidation where the 'market' held the stock in a very tight range for well over 4 months. This can point to accumulation according to IBD. Institutional investors sit and buy up all the open shares but they don't allow the stock to move up until they have accumulated their position. You can see in the zoom panel on this weekly chart that it broke out roughly July 1st from the consolidation and this week was up $30 at one point and closed up $23 higher on the week! Not bad on a week where the $SPX lost 1.3% and the NASDAQ lost 2.9%.

These stocks are so hard to enter when they have soared like this. It might be one to put on your 'waiting for a giant pullback' ChartList radar if we get the opportunity. Perhaps UHAL can get your portfolio 'moving' in the right direction!

Good trading,
Greg Schnell, CMT