Canadian bank stocks are all high up the large cap SCTR ranking tables. RBC (RY) is Canada's largest bank. The SCTR pushed up on the back of the Fed minutes but it was working up there in April before the financials surged this week.
SunTrust Banks (STI) looks very bullish on a longer-term weekly chart, awaiting a critical technical breakout. But on its daily chart, there are signs of slowing momentum and overbought conditions as price resistance nears. So what's a trader to do? Well, let's look at the two charts beginning with the big picture:
Ford is making a big statement today with a successful test of the 200-day moving average and a break above the mid May high. The chart shows Ford (F) surging in February for its first breakout at 12. After exceeding 13.50, the stock retraced 50-62% with a pullback to the 12.25 area. A higher low formed as Ford again surged and forged a higher high in April. The subsequent pullback again retraced 50-62% of the April advance and the stock bounced the last four days. With higher highs and higher lows, there is a clear two steps forward and one step backward sequence over the last few months. This amounts to an uptrend and this uptrend is confirmed with the key moving averages. Chartists can mark first support at 13.
Plan your Trade and Trade your Plan
The Healthcare sector has been out of favor and the Biotech ETF (IBB) was tossed into the bonfire with the rest of the sector. The SCTR is still demonstrating that the IBB is one of the worst performing ETFs in the market. So the real question is: Why would we post it in the Don't Ignore This Chart blog?
I keep a watchlist of biotech stocks and in the last few days, there have been significant moves in the biotech stocks. We can see the Relative Strength in purple is testing the trendline from the beginning of January. The price has bounced off support 3 times around this 250 level. Looking at the volume, it is a little light but that is not really a surprise for a sector so out of favor. The MACD gave a very positive signal cross as we can see on the zoom panel. The recent low on the MACD is much higher than the previous low in mid-February.
Stocks hitting 52-week highs are in clear uptrends and they are the market leaders. I am not going to feature a stock hitting a new high today, but rather look at one that has a good chance of hitting a new high in the coming weeks. The weekly chart below shows Cisco (CSCO) with a resistance zone extending back to the February 2015 highs. A break above this zone would put the stock at a 52-week high and be quite bullish. The indicator window shows the price relative with a similar resistance zone. A break above this zone would signal a breakout in relative performance. I will next look at the daily chart to assess the chances for a breakout.
A little more than three weeks ago, a very small $435 million semiconductor company reported quarterly EPS that nearly tripled Wall Street consensus estimates. Quarterly revenues also beat estimates by roughly 3%. That combination sent Nanometrics (NANO) soaring on April 27th, at one point up 20% on the session. NANO became overbought at that point and has spent the past few weeks consolidating with its RSI falling from 80 to nearly 50. The top of gap support at 16.99 and price support at 16 should offer up an excellent reward to risk long entry should the price of NANO move to those levels. A closing breakout above 18.14 would be bullish. Check out the chart:
Dorman Products (DORM) touched price support near 51.00, which is technically significant as DORM has been trading in a continuation pattern for the past several weeks and 51.00 has marked flag support. There was a prior uptrend (flag pole) in play off the February low and DORM longs have been patiently awaiting the next push higher. Unfortunately, the flag has been dominating the action and frustrating traders since the March 21st high. Here's a look:
The flag and sideways consolidation began after a negative divergence printed in March. This period of consolidation has aided DORM in the sense that its MACD has reached centerline support and its RSI is now close to 40 - both of which are generally solid entry points into an uptrending stock. Price support at 51.00 is important, however, so a closing stop beneath that level should be considered.
QualCom has been going nowhere since early March, but a breakout may be in the making as the stock distances itself from two key moving averages. The chart shows QCOM with the 50-day and 200-day SMAs in the 51-52 area. The stock has bounced between 50 and 53 since early March and formed a long triangle consolidation with these moving averages in the middle. The stock caught my eye today because it surged to resistance with a strong move. A breakout here would signal a continuation of the February surge and put QCOM in a long-term uptrend. The indicator window shows the price relative turning up in May as QCOM starts to outperform the broader market this month.
Plan your Trade and Trade your Plan
After a severe, correction going on 2 years, Diamond Offshore Drilling (DO) has built a nice big base. With Crude Oil approaching $50, the sentiment against oil seems to be losing energy. These big bases are important in the stock trend. Anyone who bought since last July is breakeven or better. We can see the SCTR ranking is stubbornly strong up around the 75 level. The Relative Strength line in purple is trying to break out to 10 month highs. Both of those traits are bullish.
âThe volume seems to be losing a little momentum here but still in the range of 2 Million shares/day. The MACD is trying to turn up again while it is above zero. A fresh turn up on the MACD as the stock breaks out would be very bullish. However, until this stock firmly takes out $25, it could continue to spend more time base building. This is one of those stocks that could need a longer term perspective but it definitely looks like one for the watchlist.
Greg Schnell, CMT, MFTA
The Semiconductor SPDR (XSD) is one the leading industry-group ETFs at midday on Monday with a gain of around 2%. A look at the chart shows this big gain coming at a potential support or reversal zone. First, notice that XSD broke resistance with a big move in February. Broken resistance turns into potential support in the 41.50 area. Second, the April-May decline retraced around 50% of the February-March advance. This is a typical retracement for correction within a bigger uptrend. Third, notice that the 200-day moving average is around 41.3 and fits into this support-reversal zone.