Biotechnology stocks ($DJUSBT) are among the best performing stocks since the beginning of June with an approximate 16% gain over the past seven weeks. It's not unusual for biotechs to remain on a tear for an extended period of time so pullbacks should be considered for entry. The rising 20 day EMA is one such level to consider after a bout of selling as the weakness from late June into early July demonstrated. Check it out:
The group is in breakout mode again with signs pointing to higher prices ahead. However, the DJUSBT is overbought once again so consider an upcoming pullback to test the rising 20 day EMA, currently at 1876, to be a solid entry level. Price support near 1910 should also encourage buyers.
Adobe (ADBE) continues to find new ways to hit the new highs list. Recently I have been using some of Adobe's online forms and have been amazed by all the interesting software application techniques. The stock move suggests I am not the only one noticing something in Adobe's software. After consolidating for 2-months, the stock is pushing to new highs on a flat day for the overall market.
HortonWorks (HDP) had its initial public offering a few years ago. The first year was a sell off, the second year built a base and in May, HDP broke out to fresh 52-week highs for the first time ever. After consolidating around the breakout level of $12.85, this morning HDP broke out from the consolidation.
When money begins rotating to defense in a big way, I look for topping patterns in the market. But when we're in the midst of a full-fledged bull market - as we are now - I'd much rather search for stocks in bullish continuation patterns. That brings me to Texas Roadhouse Inc (TXRH). There is lots to like here, besides the food. Below features a very strong ascending triangle pattern on TXRH:
The Relative Rotation Graph above shows the relative rotation, on a weekly basis, for the G10 currencies using the USD as the base.
For a better understanding of how to use RRGs to monitor currency rotation please refer to this blog article on the subject.
Looking at the RRG above there are two things that catch my eye.
The first thing is the fact that ALL nine currencies on the RRG canvas (the USD is the tenth currency and the base/benchmark for this RRG) are positioned on the right-hand side of the plot indicating general weakness for the USD against all other currencies. Or strength for the major world currencies versus the US dollar, just a matter of how you want to look at it ;)
The second observation is the long orange tail on $JPYUSD heading lower inside the weakening quadrant and heading for lagging. This means that the JPY rapidly started weakening against the USD over the past five weeks (closely followed by the second in line $GBPUSD), more or less going against the tide which makes it an interesting currency to watch more closely.
We could stop here and simply put on a short USD/JPY trade but if I can find another currency moving opposite of $JPYUSD I can profit from the "scissor" move on both sides of the strength/weakness versus the USD.
Currencies that fit this requirement would be NZD, CAD, and AUD (NOK to a lesser extent as it is already moving flat). As AUD seems to be just starting its move it most likely has the best potential left. The NZD, for example, has already made a big move.
To find out if such a trade makes sense we need to bring up the $AUDJPY chart:
The big downtrend spanning two years from late 2014 to late 2016 is clearly visible and so is the break in November 2016. After an initial rally, $AUDJPY peaked around 88 (three attempts) which makes it the resistance level to watch in coming weeks.
A break beyond JPY 88 will confirm the current strength AUD/JPY and very likely trigger an acceleration higher!
Expeditors International (EXPD) is a Large-Cap stock with a consistent chart pushing to new highs year after year. With all the attention to charts that swing and sway, this one seems to have a consistent trend of delivery shareholder profits. While its not a rapid rise in capital, the SCTR shows it to be a middle of the pack stock with readings between 30-70. This week the stock looks to be breaking to higher highs.
The Lithium ETF has been climbing for a while, but recently it broke above some significant long term resistance. The chart is breaking out above the 4-year base at $28 and the current bounce looks set to push it to new 5 year highs leaving the base behind. Whether you use a Head/Shoulders base at $26 or the broader top at $28, this looks like it plans on continuing.
Of course, Lithium is required in electric batteries. With all of the Tesla publicity, and all of the car companies trying to use the word 'Electric' in every marketing sentence, it seems natural that this continues to be in demand.
If your portfolio needs a spark, perhaps the Lithium ETF can help.
Greg Schnell, CMT, MFTA