Hey, I hope you had a great trading week catching some of the monster moves in Biotech. There was plenty of broad market skepticism out there most of the week, but the confluence of news and sentiment allowed being very aggressive in biotech to pay big.
Quick summary:
- Underlying signs of caution are building in the ratio charts, but there is nothing worth acting on yet
- Gold and Bonds are at the beginning of a move that will shock or frustrate most
- There are still plenty of places that look ripe for long trades/investment, although there are fewer fresh setups this week.
- The international equity picture has improved notably over the last week or so (this may be largely due to currency movements)
Let's start this week with some classic Dow Theory. The transports reached new bull market highs led by trucking and airlines while industrials lagged. This is worth keeping an eye on if the market were to have a key reversal day lower in the near term.
The Advance Decline line is leading the market higher, suggesting we aren't near an important top. For those new to technicals, breadth leading the market is one the of the most important tenants in technical analysis.
This TLT chart is primed to move higher. The move in bonds is widespread. Breakouts occurred last week in LQD, AGG, TIP, MUB, PFF, HYD
Utilities, REITs, (not shown) and gold miners are perking up and offering a confirmation of sorts for the falling rates watch.
Some miners to watch - NG, SLW, NEM, AEM
Healthcare/ pharma is another defensive group with a market relative breakout. This alone is worthy of concern, but these hints are adding up.
The TED spread is showing signs of perking up. This supports the safety trade, especially if it takes out the October highs.
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Stock/group trade ideas:
SOIL, the fertilizer ETF, has broken out of a month long head and shoulders bottom. Look to some of the funds top holdings like POT for strength next week.
This VIMC is a chinese semi play. A beautiful head and shoulders bottom breakout now forming a symmetrical triangle. It wants to trade into the 5's.
While retail is having blow ups across the space, there are still some stocks looking pretty good such as TJX and UA. Check out the quality base formed in VRA. Over 25-26 would launch this thing. You'd have to use a wide stop.
Get yourself some exposure to these building material names. If Buffett finds value here...there's significant value here. USG is a beaut technically as well
SLCA, a frac sand play, is at key support in this wedge with positive momentum. It's offering a good swing long entry here with a stop under 30.50 with targets around the upper resistance line at 35.5 and a move above that to 40.
MWW is bull flagging after a major base breakout. The current risk in a long swing is about 4% with potential upside of 30%.
Earnings season picks up speed this week with many large financial institutions reporting.
Other companies of interest reporting: WEN, CSX, INTC, SLB
Don't forget about the Needham Growth Conference this week. They have a bunch of great companies lined up, and I'll be filing some reviews on EXTR, NMRX and SNMX next week.
Have a great week!
- Aaron
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