It's been a rainy week here in New York, however, the Solar sector ETF $TAN was a bright spot as it broke out of a 2.5-year base. As a result, we've done a deep dive into the sector to identify several names that look to be offering asymmetric reward/risk opportunities on the long side.
I know you're probably tired of hearing this intro over and over again, but to start this post I want to reaffirm that at Allstarcharts we remain in the camp that stocks in the U.S. and globally are headed higher. Normally we focus on the sectors that are leading and making new all-time highs, however, the Oil & Gas Exploration & Production ETF $XOP is breaking out of a multi-year consolidation, signaling a new intermediate or long-term uptrend is beginning. As a result, we want to see which names in this space present the best reward/risk scenarios to take advantage of this thesis.
Since the market's volatility picked up in late January, one key piece of the bear thesis has been weakness in Technology, yet we've not seen a crack and flush lower. I don't know about you, but I was promised a "Tech Wreck" and will not leave until we get one or Mr. Market provides me a refund.
Okay I'm being facetious, but in this post I want to outline what I'm watching and explore what the implications are if the potential bearish patterns in this sector don't pan out.
Many have fixated their attention on the "triangle pattern" that's formed the NYSE Composite Index and other major US indices. This pattern is a visual representation of the indecision between buyers and sellers in the market, and its resolution typically leads to a significant move in the direction of its breakout. In times like this where the index itself has little directional conviction, a study of the components may offer some insight into which way the market resolves.
Three weeks ago I had the pleasure of attending the CMT Association’s 45th Annual Symposium in the Financial District of New York City. In prior years I’ve lived vicariously through previous attendees’ tweets and blog posts, so this year I was equally nervous and excited when I decided to attend in person for the first time.
This year’s theme was “Navigating the Gap: Forces That Influence Price Dynamics”, which suggests that there’s a “gap” between the market price of securities and their intrinsic value and that technical analysis can help in navigating that gap by providing a way to analyze market behavior and the law of supply and demand. As market practitioners we know that markets are not efficient, which is why we all do the work that we do.
Commodity strength has been a clear theme over the intermediate term, with the energy complex and base metals doing a majority of the heavy lifting in helping the CRB Index break out of its 2+ year range. The 41% of the index made up of Agricultural commodities has seen mixed performance, with Cotton and Cocoa leading and Sugar and Coffee struggling to put in any sort of meaningful bottom. However, there has been some improvement in the action in Soybeans and Soybean Meal, as well as Corn and Wheat which should support the CRB Index in moving higher. With that being said, this post is going to focus on the three Soy related commodities.
