Don't Ignore This Chart

February 2019

Don't Ignore This Chart

Is This Stock Breaking Out Or Building A Major Top-Formation?

by Julius de Kempenaer

On the weekly Relative Rotation Graph for US sectors, XLI, the Industrials sector is crossing over into the leading quadrant from improving. This indicates further improvement for Industrial stocks compared to other segments of the market. While zooming in on the RRG for Industrial stocks against XLI I noted the rotation of DOV inside the weakening quadrant. When a stock is at the right-hand side of the RRG, it means that its relative trend against the benchmark is already rising. A rotation into the weakening quadrant indicates a loss of relative momentum for Read More 

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A Rejuvenated Regeneron Leads Biotech Group

by Arthur Hill

It is a mixed bag for the big biotech stocks this year. Of the top ten stocks in IBB, five are underperforming SPY and five are outperforming. Regeneron is slightly outperforming SPY this year and sports a bullish pattern on the price chart. First and foremost, the bigger trend is up because REGN hit a new high in January and price is above the rising 200-day SMA. In addition, the stock broke out of a big consolidation pattern in January and this signals a continuation of the prior advance (May to August). Thus, REGN is in the midst of a larger continuation move. Read More 

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Etsy (ETSY) Finds New Buyers

by Greg Schnell

Every day, we continue to see big name stocks join the new 52-week highs. This week, a great chart of ETSY kept finding new buyers at higher prices. The stock has been a top performer since May of 2017. Notice the SCTR ranking soaring into the top of the range; it has stayed up in the top quartile for 7 quarters. Today, the stock soared above an ascending consolidation and closed near the high of the day. The investor that continues to stare at a very high price/earnings ratio could talk themselves out of this stock. But institutional investors continue to invest in the Read More 

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Vertex Forges Bullish Setups on Two Timeframes

by Arthur Hill

The daily chart for Vertex (VRTX) is quite a mess with several dips under the 200-day SMA over the last ten months, but a short-term bullish pattern is shaping up and the weekly chart also sports a bullish setup. Let's look at the weekly chart first because the longer timeframe should be considered more dominant. First, VRTX is in a long-term uptrend. The stock recorded a 52-week high in January and remains above the rising 40-week SMA. A cup-with-handle appears to be forming over the last several months with neckline resistance in the 195 area. A breakout here would open the door to new Read More 

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Making Money Out Of Thin Air

by Greg Schnell

There is a small business in Canada called Vitality Air, which compresses air from Banff National Park and sells it around the world for people to breathe and smell. Click on the link for a funny video, hosted by the always-entertaining Jane Wells! The little business is racking up good gains and was featured on CNBC Strange Successes. But it is not just compressed air that is pumping out gains. Compressed industrial gases are sending industry heavyweights like Air Products (APD) and Linde (LIN) to fresh new highs. These stocks are now breaking out in tandem after both Read More 

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Where Is The Volume?

by Julius de Kempenaer

My last article in the RRG blog looks at sector rotation for US sectors and how there are some disconnects between groups of sectors on both the daily and the weekly time frames. My conclusion from that article was that the current rotational patterns are sending mixed signals which makes it difficult to get a clear picture for the market in general, i.e SPY. When things are unclear, I have learned to step back and try to get a better view of the big picture. Very often that also means going back to the basics Read More 

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Pfizer Bids to End Correction

by Arthur Hill

When sitting down to a chart, or even standing, establishing the direction of the bigger trend is the first task. The direction of this trend establishes my trading bias and tells me where to focus. My trading bias is bullish when the trend is up and this means I focus on bullish setups. Among other things, this includes pullbacks within the uptrend (wedges), bullish continuation patterns (flags) or upturns in momentum (PPO). Pfizer shows a classic case-in-point. The stock is in a long-term uptrend because it recorded a 52-week high in November and remains above the rising 40-week SMA Read More 

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Gold Surges And Carries The Miners Higher

by Greg Schnell

Gold and gold minings stocks surged to start the trading week.  What makes this so important is this is the first 52-week high in the gold mining stocks since the 2016 spring surge. Pay attention to the industry group as well as the industrial metals. They both look ready to run here. Good trading, Greg Schnell, CMT, MFTA Read More 

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This Marathon Stock Has Had Marathon Buying

by Greg Schnell

Marathon Oil (MRO) has had two marathon buying days with massive volume. While Day One didn't see any price movement on large volume, Day Two sure did. The price has just moved out of a short 2-month base and looks set to accelerate from there. The stock is meaningfully off the October highs, but it is showing all the right signs for a break from the downtrend. The SCTR is surging from below 10 to above 30. This suggests some strong price action relative to the other large caps. The down trend in relative strength (in purple) is breaking the down trend as well. With a little more Read More 

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JP Morgan deteriorates further on Relative Rotation Graph

by Julius de Kempenaer

One of the choices in the drop-down selection on the Relative Rotation Graphs page is the DJ-industrials (Dow 30 Industrials). This RRG shows the rotation of all 30 Dow stocks against the $INDU. The RRG above shows the daily rotation and highlights the rotation of JP Morgan Chase & Co. (JPM), a heavyweight in the financials sector. This rotation caught my attention as it is moving strongly lower on the JK RS-Ratio scale and pushing further into the lagging quadrant. The reason for bringing up the Read More 

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DR Horton Builds A Base To Stair Out Of (DHI)

by Greg Schnell

D.R. Horton (DHI) has been in a year-long down trend. Yesterday, on the back of a broad move by the indexes higher, DHI broke above a long downtrend line. It's early in the week, but this would be the first close above the trend line in a year if we can stay at these levels through Friday. A couple of promising signs are starting to show up on the chart. Starting at the bottom, the Percentage Price Oscillator (PPO) displays momentum and has broken the down trend, suggesting this breakout was going to occur. The Full Stochastics are surging above 80%, which is very bullish Read More 

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CBOE Holdings Fails to Bounce

by Arthur Hill

We are 29 trading days into 2019 and the S&P 500 is up a very respectable 9.49%. Furthermore, some 465 stocks in the S&P 500 are up year-to-date, which means 35 are down year-to-date. CBOE Holdings (CBOE) is one of these stocks (-3.91% year-to-date) and a bearish continuation pattern is taking shape on the price chart. The chart shows CBOE breaking out with a surge in late October and outperforming the market in early November. This breakout did not hold as the stock fell back below the breakout zone in early December and back below the falling 200-day SMA. Even though the stock Read More 

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Microsoft Bids for a Momentum Shift

by Arthur Hill

Microsoft is battling the rising 200-day moving average and making a bid to shift momentum back to the bulls. The chart shows MSFT falling along with the market from October to December and then rebounding sharply in January. The stock is currently consolidating around the 200-day SMA with a pennant, which is a short-term bullish continuation pattern. This pattern represents a consolidation (rest) after an advance and a breakout at 108 would signal a continuation higher. The indicator window shows 14-day RSI shifting from a bullish range to a bearish range in October. Notice how RSI Read More 

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Germany Suffers A Setback Worth Watching

by Greg Schnell

This rally has been great, lifting portfolios around the world. With lots of optimism helping the market here, there are some worldwide charts that I reviewed on the Weekly Market Roundup show. There is a link to the video further down in this article. Back in October (see the red arrows on the chart below), I mentioned that the German stock market was breaking down in a pattern that we have seen before. This breakdown coincided with USA charts breaking down in October 2018, with the first bar breaking below support on the $DAX and the US market breaking the Read More 

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Save This Chart To Keep Track Of The Yield Curve Interaction With The Economic Cycle

by Julius de Kempenaer

The chart that I want to share with you today is part of a (bigger) research project that I am doing with regard to the various phases in economic cycles and their relation to the (shape of) yield curve. The chart above shows the S&P Index in the main panel. The panel below shows the difference between 10yr and 2yr yields on US treasuries. This 10-2 relationship is generally used to indicate a normal, 10yr > 2yr, or inverted, 10yr < 2yr, shape. The overlaid, red and green, dashed vertical lines indicate the start of periods of Expansion Read More 

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REITs, Utes and Healthcare Lead New High List

by Arthur Hill

Chartists looking for the sectors with the most stocks in strong uptrends can turn to the High-Low Percent indicators. High-Low Percent equals new 52-week highs less new 52-week lows divided by total issues. This indicator is positive when new highs outnumber new lows and negative when new lows outnumber new highs. The more positive the indicator, the more new highs and the more internal strength. The chart below shows S&P 500 High-Low% ($SPXHLP) in the top window and the High-Low Percent histograms for the top five sectors, as ranked by the 5-day average of High-Low Percent. Note Read More 

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Fastenal Starts Speeding Up (FAST)

by Greg Schnell

Recently, Fastenal has been building a bias to the upside. Its December low, notably, was higher than its previous low in October, which itself had improved upon the prior June low. This progressive stock continued to make higher lows even as the overall market broke to new 52-week lows. Fastenal's SCTR, meanwhile, has pushed up to the highest level in a year. The relative strength is making all-time highs. Last week, the price edged out the previous 52-week highs; that strength continued into this week. The one-year downtrend in momentum has now been broken to the upside Read More 

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Amazon and the Seismic RSI Shift

by Arthur Hill

The overall trend for Amazon shifted from bullish to bearish in October and RSI caught this shift. Before looking at RSI, let's review price action and the bigger trend at work. The chart shows Amazon moving to a new high in early September, forming a lower high in early October and breaking support with a sharp decline in October. The index fell further in the second half of October and broke the 200-day SMA for the first time since March 2016. The stock then bounced around the 200-day SMA for a few weeks and plunged in December. This was the first 52-week low in Amazon since January Read More 

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Jinkosolar Stares At A SunRise (JKS)

by Greg Schnell

Jinkosolar has been on a big roller coaster loop for the last two years. In recent weeks, the stock has started to break out; this week, the move has been 9% in the first four days. The relative strength (shown in purple in the chart below) suggests the stock is starting to outperform the S&P 500 average as the ratio is rising. The new six-month highs in relative strength provide a visual clue that the stock is performing well. The full stochastic has moved above 80, which also suggests strong price action. Price is flying up the right hand side like a wide Read More