Saturday, June 9, 2018

Trannies Ready to Show Their Stuff

The Transportation stocks are lining up on multiple timeframes to make a new leg higher it would appear. As market participants we know that a strong economy and by extension, a strong stock market should see shippers and carriers performing well. 

If Train and Freight companies are delivering products in high quantity, it means companies that sell those products are seeing high demand from consumers spending discretionary income. All combine to suggest a strong underlying demand for goods and services we need or want for our daily lives.  

It is my view that the Transport stocks are on the cusp of extending their rally significantly in the near future.  

Monthly
The long-term view of IYT has the look of an orderly consolidation after strong 2016 and 2017 rallies. Price extended up to the 161.8% Fibonacci level of the 2015 bear market decline and has since moved sideways to let the 20 Month SMA catch up to price.

Should we see a resumption of trend above the $200 level, the next extension area sits near $250+.

Weekly
The Weekly chart shows price holding firm in a range just above a multi-month resistance area. This is setting up a 3x Weekly High breakout potential should we see price move through the $198 level.

A breakout here brings the prior highs into play quickly

Daily
The Daily chart zooms in on the 4-month trading range. Note the gap resistance from late-February right near $198. This resistance has contained prices the entire time, but the behavior of the near-term action is changing.

There have been multiple tests of the higher end of the range. Those rally attempts were all rejected sharply and prices moved back to the support lows. Since the end of May sellers have not been able to reject prices as they did previously, this to me shows a strength.

It appears the sellers are wearing out and an upside resolution is imminent.   

A couple names we hold in our Model Portfolios at zentrendstrading.com are UNP and ODFL.

Note that these leading names in the Transport group have already broken through their resistance and retested the area as support. Prices are now responding higher off of that retest.

UNP

ODFL

We must always remember that a Sector or Index is not an entity on its own, but rather a group of individual underlying stocks. If these stocks are breaking out and leading the group higher, the odds increase that the Sector or Index will follow closely behind.

If you have interest in learning how to identify and manage this kind of multi-timeframe investing, please visit us as zentrendstrading.com.

We provide detailed Notes, Videos, and ongoing dialogue for our positions allowing members to follow along with our trades. Our process is designed to take advantage of large swings that occur in the market without having to sit in front of your computer all day long. 

For questions or comments please contact me at cody@zentrendstrading.com or on Stocktwits/Twitter @ZenTrends

Friday, June 1, 2018

Biotech Perking up on Multiple Timeframes

IBB Monthly
IBB has rotated up on the Monthly chart for May. We saw price come down and test key support but then managed to recover and close above the April high. This sets up an easy risk/reward using the key support at May's low as a stop

Weekly
To follow up the Monthly Bull signal, the Weekly chart confirmed an Outside/Up rotation. This also managed to move to new 10-week highs, which is a significant short-term momentum signal. This can be a more tactical trade using this week's low as the risk reference point. Substantial upside exists from these two combined timeframes.

Daily
Zooming in on the Daily chart we can see these recent tests of the $100 level and then the clean breakout over the last 2-months highs.

XBI looks even stronger but the patterns in IBB are a little cleaner in my view.

XBI finished May at the highest Monthly close ever


Our portfolios are currently long ILMN, RGEN, JAZZ

ILMN

RGEN

JAZZ

Friday, May 25, 2018

NVDA in 4 Charts

Monthly Bull Flag > 239.25
The monthly trend has been just massive in NVDA, but that doesn't mean its over yet. Price has digested for multiple months at the highs and is now rotating higher. Its possible we could see a similar reaction to the pattern in mid-2017.

Weekly breakout + 3 week digestion
The stock made new all-time highs recently, in anticipation of its earnings it ran $50 off its low in 3-weeks time. Once the earnings came out (they crushed every metric) the stock just sorta hung out and has been coiling orderly since.

Daily ABC/Bull Flag + Outside/Up day then a 2-day grind higher
Zooming in on the recent consolidation, it looks very normal after the large ramp. It filled the 5/4 gap for all intents and purposes after making an ABC pullback type pattern, and has now rotated off the low with a bullish Outside bar. 

Also note the last two days into the holiday weekend the broad market faded lower, while NVDA closed higher both days. Showing some added Relative Strength there.

Hourly Downtrend breakout + Divergence on Double Bottom, then follow-through
Looking to the Hourly view we see the downtrend breakout which came off of a lower low/Double Bottom pattern with a positively diverging momentum reading. Price has since worked its way higher showing follow-through instead of a quick fail.

As long as prices hold the low from 5/23 I will be very long and looking for an upward expansion back to new all-time highs.

Friday, December 1, 2017

Banks Rip, But Weekly Charts Still Say Buy

We saw a huge move across the Financial sector this week and I don't believe what we are seeing is a top. On the contrary, I think this week's signal represents a brand new opportunity to add to or establish new positions in Banks. I am still adding to positions right here and expect much more upside in the future. We could certainly see consolidation short-term, but long-term this remains an emerging trend.

Regional Banks KRE
This is exactly what I look for in an ideal long entry. We are seeing volume expand on a move to new weekly closing highs after a 12-month sideways consolidation. In fact this was the largest weekly volume in the history of the KRE. The second highest volume came on the post-election breakout move which continued for another 14% over the next 4+ weeks. Momentum also is emerging from a highly coiled pattern which is indicative of significant intermediate upside potential.

Regional Banks tend to be the most sensitive of the Financial stocks and when they are in position, good things tend to follow. Check out some of the other moves that occurred this week.

JPM new all-time highs

GS Cup/Handle suggests a move to the $280's to start

BAC Breakout/Retest/Resume

WAL

Members of zentrendstrading.com have been long in the Regional Bank space for some time based on larger timeframe patterns. If you would like assistance catching big moves, learning to identify strong setups, and managing positions from entry to exit, please inquire about our offerings.   


Sunday, November 5, 2017

Mystery Chart: Bull or Bear?

Its always a fun exercise to remove all potential bias from a stock and simply strip the price action down to the bare minimum. From a supply and demand standpoint we should be able to evaluate whether or not a particular opportunity offers a favorable risk/reward.

With this in mind, take a look at the mystery chart below: Is it offering a Bullish opportunity or Bearish based only on the supply/demand dynamics of the stock?


I'll be interested to hear your feedback. The goal of this is not to try to guess what the mystery stock actually is, but rather would you want to be a buyer or a seller based on the info above alone.  

Later in the week we will revisit this chart and see what readers think is the best course of action. 

Saturday, October 21, 2017

Interest Rates to Never Be Lower

I have been building a thesis over the past year or so that Interest Rates are in the process of bottoming on a multi-decade timeframe. It is my view that we will never see lower rates in my lifetime.

As we know from historical study, markets often telegraph turns in economic conditions well ahead of mainstream evidence being made available. Prices will top out on the best news possible and bottom on the worst. When the conventional opinion is leaning one direction, the market begins to tip the opposite. It is up to us to see through the noise and listen to what the market is really telling us.

This brings me to the 10-year Treasury Yield (TNX)
   The first piece of evidence is the price action over the past 5-6 years. In 2012 the TNX made a new low not seen in its history. Rates were able to rally for much of 2013 (recall the bull market for stocks during that year as well). We then saw a steady decline over the next two years which culminated in an even lower low that held for less than one week before reversing back higher.

Note that momentum was much higher on the 2016 low compared to the 2012 low, creating a strong positive divergence. Since the beginning of the year Rates have consolidated orderly and have formed a Bull Flag pattern into the now rising 20 Month SMA. Regardless of the asset class, this is my bread-and-butter setup and has led to many monster upside moves over the years for me.

From a price and momentum structure this is what I would call a multi-year Double Bottom pattern. Often it is suggestive of major lows being set and very strong price recoveries ahead.

I want to look at the structure of momentum by itself as well.
This is the momentum pattern going back to the mid-70's. I use MACD differently than most; MACD is an excellent indicator of trend. When momentum is above the Zero line price can be considered to be in an uptrend; when momentum is below Zero, price can be considered to be in a downtrend.

If we look at this chart it shows us only one time in the last 40-years when Rates were in a sustained uptrend (1975-1982). The rest of the time momentum has been < Zero and only breaching the line for very brief periods before retreating once again. This is downtrending behavior.

It should be noted that the activity over the past few years has been changing from the previous pattern. At no point in the last 30-years has the indicator been able to move > Zero and then sustain above the line. Each attempt to get above Zero was then followed by at least 5-years of action back below Zero.

However, the most recent movement has recovered Zero within 2-years of the prior visit. The pattern appears to be changing for the first time in its observable history. The more time momentum can hold above Zero, the more confidence we can have in this thesis.

So how do we make money based on this theory? If Rates are going to increase steadily over time, what will be the primary beneficiary of the change in trend?

In my view it is Bonds that will suffer the most, while Bank stocks and especially the Regional Bank stocks, set-up to benefit the most.

 JPM

  KRE Regional Banks

These formations are a decade long or more and have only made new highs within the past year. Typically the length and size of the base gives an indication to the length and upside potential of the price trend to follow.

As the saying goes, "the bigger the base, the higher the move in space". In the examples above, JPM has been building a 17-year horizontal base pattern. Regional Banks have been in the process of emerging from an 11-year base of their own. The upside that can come from these formations we know from studying the great winners of the past. In my experience and study, these are some of the highest probability structures to focus long-term positions on, and we have been doing so.

Members of zentrendstrading.com have been receiving alerts and position management education in the above names as well as others in this space. If these trends can persist we may be establishing positions that last for the next decade or more. Just this week the Regional Bank space is offering yet another opportunity to participate in the blooming trend.

If this is something you would like to learn more about please contact me @ZenTrends on Twitter or visit our website.

Thursday, October 19, 2017

Food For Thought


This is a yearly chart of the SP500 from 1962 to 2017. Is it just me or do those two periods look similar?

-From 1963 through 1980 the market remained in a sideways trading range (17 years)
-From 1999 through 2013 the market remained in a sideways trading range (14 years)

Trading volumes are notable as well; Heavy distribution volume came in through 2000-2002. The level of supply that was created went on to contain price for the next decade.

It wasn't until the last few years that we began seeing some accumulation volume come into the market. Following 2006, volume declined every year until 2012.

Trading volumes are now increasing as prices rally away from the base. 

The previous instance when prices cleared decade long range highs, the market rallied for the next 18 years with less than a handful of negative years during that period.

The current market is in year 5 of the most recent breakout.

Is it possible we remain early in this emerging trend? Does it look like America is failing?

Yes. No.