Don't Ignore This Chart

Yields Soar, Banks Explode Higher

The stubbornness of treasury buyers has kept a lid on treasury yields and, as a result, banks ($DJUSBK) have struggled to determine which direction they should move.  Well.....this morning's reaction to an upwardly-revised GDP number (TNX up 7 basis points to 2.29% at last check) for the first quarter and the Fed's decision to lift restrictions on banks paying dividends and buying back shares seems to have resolved that issue.  The 10 year treasury yield ($TNX) is having its biggest spike in a few months and banks are benefiting.  Check out this chart:

That's a serious jump in banks and, barring a major reversal later today in both the DJUSBK and TNX, I'd look for further gains in banks this summer now.  Also, the 2.30% level has been a key pivot level in the past on the TNX and there's bullish wedge resistance at that level as well.  Therefore, view a break above 2.30% as a major upside breakout, further adding to bullishness in banks and life insurance companies ($DJUSIL).

Happy trading!

Tom

XRAY Traces Out a Classic Bullish Continuation Pattern

Dentsply International (XRAY) has a large cup-with-handle pattern forming over the last twelve months and the stock is on the verge of breaking rim resistance. Popularized by William O'Neil of Investors Business Daily, the cup-with-handle is a bullish continuation pattern. This means it forms as a consolidation after an extended advance, which runs from October 2014 to a 52-week high in June 2016. The handle is a smaller consolidation after the January-February surge. Either way you slice it, a breakout would be bullish and argue for a continuation of the uptrend. Traditional measuring techniques would target a move from rim resistance that is around the same as the height of the cup, which is 20%. Take this target with a bucket of salt because it is just a guesstimate. 

Continue reading "XRAY Traces Out a Classic Bullish Continuation Pattern" »

Valeant (VRX) Investors Putting In A Valiant Bid For Investor Interest

Valeant (VRX) investors watched their stock top out 2 years. Anyone still holding the stock from back then needs a return of 100's of % to get back to where they once were. Frustrated investors sold VRX to claim their capital losses. Hedge funds sold their shares in full public view, frustrated by the fall. While the company does not sell a potion for healing investor ills, it may be that they have a new group of investors that have not lived through the trauma. 

With technology stocks being the ride of the year for winning investing horses, it seems too long into the run for me to add new positions in that sector. While every day we are faced with choices, perhaps some days looking at what is rising out of the spring 2017 planting is timely. Valeant might fit that bill. This is not for the faint of heart. Bottom fishing is harder, but we can see the SCTR has now pushed up above 75. Positive volume is starting to return to the stock.


On the daily chart, the new base is easier to see. Looking to break out to 7-month highs, Valeant has started to outperform the $SPX to new 3-month highs. It would not take much to break out to new 6-month relative strength highs. Sometimes the SCTR surges up, backs off, then resurges into the top quartile. The volume surges on a daily basis are admirable. There are clues suggesting a change in view is warranted.

Investors could trade it on a breakout above $17.25. If it can't hold the level, I'd let someone else own the stock. 

Interestingly enough, we had a smaller breakout a year ago that failed, and I suggested trading it against $25. Here is a link to that article. Valeant 2016 I would suggest much the same strategy today.

Again, this is not for the faint of heart, but there are some encouraging signs here.

Good trading,
Greg Schnell, CMT, MFTA.

 

HCA Healthcare Bounces off Breakout Zone

HCA Healthcare (HCA) is turning up at a key level and showing signs that the long-term uptrend is resuming. HCA is in a long-term uptrend because it broke out in January and recorded a 52-week high. This breakout zone turned into support around 82 as the stock fell back to this area with a “throwback”. A classic tenet of technical analysis is that broken resistance turns into first support. HCA successfully tested this newfound support zone with a bounce the last two weeks. Also notice that the PPO(5,30,5) turned up, which means upside momentum is moving in the right direction.

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

Plan your Trade and Trade your Plan
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First Solar Starts Generating Some Power (FSLR)

First Solar (FSLR) has been down and out for a while. The SCTR ranking has been below 10 for a long time. The SCTR started to surge in early May but fell back. This week it kicked back up to 85. With Friday's high close, FSLR is starting to generate some price power.

With new volume hitting the stock recently and the MACD turning up while above zero, this looks like a stock that wants to move higher.

Good trading,
Greg Schnell, CMT, MFTA

 

BLUE Looking At Blue Skies Ahead?

Biotechnology stocks ($DJUSBT) were the second best performing industry group last week, trailing on renewable energy ($DWCREE).  Both groups appear poised to continue their rally based on their longer-term weekly technical outlook.  Therefore, it's probably not a bad idea to look at stocks in these groups that pull back to find critical price support levels from where they're likely to continue their push higher.  Bluebird Bio (BLUE) had a rough Friday (-5.49%) after a huge advance 60% advance over the three prior weeks.  For short-term aggressive traders, keep an eye on the following key levels:

The two green arrows mark what I consider to be the best support levels.  On Friday, BLUE's intraday low of 104.90 tested the rising 20 day EMA.  That moving average, along with price support near 98 should provide entry points for longs.  The initial target would be a gap fill to Thursday's close at 118.50.

Happy trading!

Tom

BioMarin Next In Line For Breakout Among Biotechs?

BioMarin Pharmaceutical (BMRN), like the overall biotech industry ($DJUSBT), has struggled for the past 18 months to clear overhead price resistance.  But over the past couple trading sessions, we have seen one biotech company after another clear resistance on strong volume and accelerate.  It appears that BMRN is awaiting its turn.  While its gains this week have been strong, the best may await on a breakout.   Here's the longer-term weekly chart:

You can see that interest is picking up in BMRN as weekly volume is its highest in eight weeks to accompany a 9.7% move higher.  But a major breakout at 100 remains.  Money is definitely rotating towards biotech stocks and healthcare (XLV) as you can see that relative downtrend line (biotechs vs. S&P 500) has broken.  The XLV now has a SCTR reading of 95.6, the highest of any sector, and biotechs are the primary reason why as they've gained 7.66% as a group in the past week alone .  Given the weekly RSI and stochastic at 60 and 43, respectively, it would seem as if the BMRN party may just be getting started.  We do need that breakout on increasing volume to confirm, however.

Happy trading!

Tom



 

MACD Histogram Teeters as AT&T Breaks Wedge Line

Despite a strong stock market in 2017, AT&T ($T) is having a tough time with a breakdown in early May and a sharp decline below the 200-day SMA. The stock rebounded after a double-digit decline with a bounce back to the 200-day SMA, which is now falling. Thus, we can clearly say the long-term trend is down for this stock. Short-term, the rebound ended as the stock broke the wedge line and moved below support at 38.50. This signals a continuation of the prior decline and argues for further weakness, perhaps back to the November lows. 

Continue reading "MACD Histogram Teeters as AT&T Breaks Wedge Line" »

Clorox (CLX) Polishes A New High

Clorox (CLX) is a big Consumer Staples company showing off a new 52-week high this week. The breakout jumps above a 2016 top and a high touched in March 2017.

The volume has been tepid the last 4 or 5 weeks so that is a little concerning, but everything else on the chart looks polished!

Good trading,
Greg Schnell, CMT, MFTA

 

Breakout in Biotech SPDR Signals Trend Continuation

The Biotech SPDR (XBI) is starting to lead the market again with a consolidation breakout and 52-week high. The chart shows the ETF hitting an initial 52-week high in February and then consolidating for four months. It looks like this consolidation is ending and the bigger uptrend is resuming with this week's breakout. Using a parallel channel for a target, the upper trend line extends to the upper 80s by August-September. The indicator window shows the PPO(10,40,1) in positive territory since August 2016 and this confirms the long-term uptrend. 

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

Plan your Trade and Trade your Plan
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