A beauty chart on monthly, weekly, and daily timeframes is setting up just under a major magnet level; there is an an earnings catalyst on the horizon which may goose the action in our favor quickly; and the premiums are relatively cheap for an upside bet. What's more, the company behind the stock offers us a great opportunity to sleep well while we ride out our thesis. What's not to love?
This week we have a special guest on the podcast: Eddy Elfenbein of Crossing Wall Street and PM for the $CWS Exchange Traded Fund. This is a show about Technical Analysis so I think it's important to also include some of the masters of Fundamental Analysis to tell us how they find charts and technicals helpful in their process. Eddy is one of the original Financial Bloggers and I have a ton of respect for him and his work. He is a pioneer in both social media and portfolio management. I love how he explains his appreciation for Intermarket Analysis and Relative Strength as useful tools throughout his process. As many of you know, these two are near and dear to my heart so it's cool to see the Fundamental community embracing them in similar ways. This was a fun conversation!
Most of the Commodities and Currencies we track continue to lack a long-term trend, but I want to outline a few charts in the space that are notable right now.
Long-term, we're bullish Equities in India and around the world, but are remaining patient in the near-term due to momentum and breadth divergences we've been seeing across major indexes, sectors, and individual names. It's happening in the US too.
We've been writing about this for a few weeks, so I wanted to follow up today and show the progression of that thesis.
Healthcare Providers quickly went from hero to zero in Q4 of 2018 after a failed breakout and bearish momentum divergence, but we're beginning to see signs of a potential mean-reversion over the short-term.
Let's start with Healthcare relative to the S&P 500, which has been unable to find its footing since topping 5 months ago. Prices have now retraced 61.8% of their 2018 rally, which may offer some short-term support and transition the trend from down to sideways.
For those new to the exercise, we take a chart of interest and eliminate the x and y-axes and and all labels eliminated to minimize bias. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. It can even be inverted or a custom index.
The point here is to not guess what it is, but instead to think about what you would do right now.Buy,Sell, or Do Nothing?
As long as Mr. Market wants to keep grinding volatility premiums in options lower, we'd be foolish not to be buyers of long calls with expirations 4-6 months out in individual names that are showing signs of upward momentum. Who are we to argue with Mr. Market?
The next candidate on our list hails from the telecom space.
What does it mean when you hear, "Overhead Supply"? How does that help anyone?
The market is a beautiful thing. It's driven by supply and demand dynamics, or buyers and sellers, based on reasons that we don't need to know. I've noticed that the majority of market participants like to worry about the "why?". We choose to worry about the "Where, When and For How Long?". It seems like a much better use of our time, particularly if our only goal is to make money. We're not interested in writing gossip columns.
For me, overhead supply is when there are an overwhelming amount of sellers relative to the amount of buyers around a certain price. Sometimes you get the smartass in the room that says, "Well JC for every buyer there must be a seller". Yes, dummy, but there aren't an equivalent amount of willing buyers and sellers and every price. That's why stocks move.
Are you guys using Koyfin yet? If not, I suggest you start.
Koyfin is my favorite new financial data and analytics platform. It seems like every day I learn about a new feature that helps me throughout my process. It's so easy to use and everyone I speak to loves the product.
Full disclosure, we're investors in the company. But we're investors for a reason. The product is amazing and I believe founder Rob Koyfman is creating a ton of value to our community, and not just technical analysts but everyone.
Last week I was at the CMT Symposium in New York and had a chance to chat with Rob so he could explain exactly what Koyfin is and some of the new features that they will be rolling out this quarter.
The "Gap and Go" pattern is popular with intraday and swing traders. It is a situation where a stock gaps higher out of a base (often earnings driven), then punishes the opportunistic faders who are playing for the stock to come back and "fill the gap." The opposite happens, resulting in a slow, painful grind higher hurting all those short holders.
We've got such a situation developing in the semis space, where a slow grind up has beaten all the faders to a pulp and now it appears we might be setting up for one final push to inflict hurt on the final stubborn bears.
