We write a lot about focusing on the secular leaders in each sector and industry. Whether it's online retail, medical devices, or more niche areas like data-centers or mobile payments, they tend to share a common thread of innovation and technology.
Biotech fits this theme and has become an emerging leader, making new all-time highs for the first time in almost five years. It's been one of the top-performing subsectors off the lows and one of the first to reclaim its year-to-date highs.
In this post, we're going to drill into the space and highlight one of its strongest areas... Genomics.
This is a special weekend. The close on Friday marks the end of the day, week and month. That means we have a fresh batch of weekly AND monthly charts waiting for us. This process provides a lot of information because, by stepping back, it forces us to identify the direction of the primary trend.
In the meantime, a few shorter-term charts caught my attention. Both have been horrendous laggards in this market: Regional Banks and Industrials. My question here is whether or not we're seeing a changing of the guard?
Here are Regional Banks relative to the S&P500 putting in what appears like a fairly clean double bottom. Momentum putting in a bullish divergence is a nice touch:
Sentiment has not been good for Chinese Equities with a handful of recent sanctions adding to the general uncertainty around China-US relations. For the most part, we're seeing this reflected in price as the Shanghai Composite and iShares China Large-Cap ETF (FXI) are trading at multi-month lows relative to the S&P 500.
Interestingly enough, the area being hit hardest with negative headlines is one of the few bright spots in China's market right now... Technology and Internet stocks.
In this post, we take a look at the improving relative strength from this group and offer trade ideas in some of its leading stocks.
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In the latest All Star Charts Monthly Conference Call, JC laid out a number of bullish trades. In the week or so since that call, a number of the stocks mentioned have since pulled back. Does that mean the trades are dead?
Not necessarily.
Nothing goes up in a straight line. And if you're a believer that our current pullback is just a result of sector rotation and a reload for a later resumption higher, then you've got to be a lover (as I am) of opportunities to enter the strongest stocks as they pause and/or pull back a bit.
With that in mind, we're putting a trade on in a Pharma stock that has the wind in it's sails.
The market remains a hot mess where we're preferring market-neutral trades, however, some absolute trades are appropriate when the reward/risk is skewed heavily in our favor.
We outlined some favorable longs and shorts earlier today.
Another way of skewing the reward/risk in our favor is by looking for "big bases."
The way we learned it is the bigger the base, the higher in space and this is certainly a big base. And the reason we like looking for base breakouts in this environment is two-fold.
First off, big bases take time to form because they are caused by steady institutional accumulation. Mom and pop investors aren’t the ones creating this type of pattern, so we know that there’s underlying demand that will support prices if they do move lower.
One of our six charts to watch this week is the Nifty Bank Index, so today we want to look at two stocks showing symptoms of the underlying problem in the sector.
Don't fight the tape. The markets are moving higher, whether we agree with it or not.
That said, we want to be long the strongest stocks. This is trendfollowing 101.
Last week, Steve Strazza put up a bunch of ideas in semiconductors which have been leading the way. Many are now breaking out so we're going to put on an options trade to take a jump into this trend.
For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it’s a custom index or inverted, who knows!
We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.
You can guess what it is if you must, but the real value comes from sharing what you would do right now. Buy, Sell, or Do Nothing?
