Don't Ignore This Chart

Russell 2000 Establishes a Clear Line-in-the-Sand $RUT

The Russell 2000 surged last week and this bounce gives chartists a clear level to watch going forward. The chart below shows the small-cap index surging from early November to early December and then stalling between 1330 and 1390 for nine weeks. The index exceeded the early December high and hit another new high with the move above 1400 in February, but this new high did not hold very long as $RUT fell back to the January lows. With last week's surge, these lows held and the 2017 lows now mark an unequivocal line-in-the-sand for chartists to watch. Being an index with hundreds of stocks, I would be inclined to add a buffer and set a support zone in the 1325-1340 area. A weekly close below 1325 would break said support zone and suggest that sellers are taking control. 

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Defense Stocks Resolve Momentum Issues, Poised To Lead

Bullish rotation continues in most areas of the market and we saw a perfect example of that last week in the Dow Jones U.S. Defense Index ($DJUSDN).  The DJUSDN had a HUGE month in February, gaining roughly 6.5% in that month alone.  That swamped the benchmark S&P 500, which gained 3.7% in February.  The problem, however, is that early March price high was a struggle and accompanied by a negative divergence.  Take a look:

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Tesla (TSLA) - The Ride That Never Ends

Tesla (TSLA) has been a range bound stock for years with a ton of media interest. For buy and hold investors, the last three years has been difficult. It's the rollercoaster ride that never ends. I wrote about Tesla when it was at its lows in December. Is Tesla About To Hit The Ditch December 4th, 2016? You can see where the trend lines were drawn. In the article, I discussed how important it would be that the lows hold. A break above 30 on the SCTR would be bullish. We can see the lows held, TSLA broke out above the trend and went on an $80 run. 

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ConocoPhillips Breaks Downtrend; SCTR Soars

ConocoPhillips (COP) saw its SCTR soar nearly 47 points after an 8.81% increase in its stock price broke its four month downtrend.  COP's strength began earlier this week on a reversing candle at gap support and culminated with today's breakout.  Here's the chart:

Prior to this most recent uptrend, COP was oversold with its RSI near 30.  That's an unusually low level considering that COP is in a longer-term uptrend.  The SCTR closed at 77 on Thursday, but I'd expect to quickly see the December SCTR high just below 90 tested sooner rather than later.

Happy trading!

Tom


 

The Regional Bank ETF (KRE) Tests The Trend - Strong Volume Gainer Tip

The Regional Bank ETF (KRE) is bouncing off the trend line today after testing below the trend line yesterday. This is a strategically important place on the charts for the regional banks. The breakdown in Relative Strength to new 4 month lows suggests this trade is losing support as investors look to other areas of the market for outperformance. However, the market has spent a week trying to base here as you can see in the zoom box after falling. 

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Small-caps Turn Negative Year-to-Date

Small-caps are still leading the market since early November, but they are lagging in 2017 as year-to-date performance turned negative. The PerfChart below shows year-to-date performance for seven major stock indexes. The Nasdaq 100 is up around 10% and leading the pack by a wide margin. The Dow Industrials, S&P 500, S&P 500 Equal-Weight Index and S&P MidCap 400 are positive year-to-date, but up significantly less than the Nasdaq 100. The Achilles heel of the market is clear when we look at the S&P Small-Cap 600 and Russell 2000, which are now negative year-to-date. We are almost three months into 2017 and these two small-cap indexes have nothing to show.

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There's Not Much To Like About This NASDAQ 100 Stock

Stocks that combine poor fundamentals, technicals and seasonal weakness are probably stocks to avoid.  QUALCOMM Inc. (QCOM) is one such stock as it was hit in January with multiple lawsuits and Apple's (AAPL) suit against QCOM really damaged the QCOM chart technically.  Here's a look at the breakdown that occurred following the AAPL suit announcement:

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China Unicom (CHU) Dials In To 52 Week Highs - Custom Size Tip

China Unicom (CHU) is a huge telecommunications company as it ranks 4th in the world for subscribers. This week it extended a breakout and pushed up to fresh new highs. The SCTR is at it's highest level in 2 years and is above 75, which I think is a big positive. The weekly MACD made a positive cross above the zero level which usually suggests a lot of momentum to go higher. The base built below the red line is exceptionally good with higher lows since last summer.

This looks like a great entry with a stop under this weeks low. It also may help diversify your portfolio.

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Small Caps Hang Onto Key Price Support

The Russell 2000 has been under selling pressure but is now testing key support on both its daily and weekly charts.  There is a slight negative divergence that's present on its weekly chart, so that would be a signal of possible weakness ahead.  The good news is that none of the other major indices have similar momentum issues on their longer-term weekly charts.  Still, let's focus on the small caps and take a look at the support that's holding on the daily chart:

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