Identifying rotation is very important for a successful trader/investor to do. If you can see when money is flowing into a group you can jump on for the ride up. Also seeing where money is moving out of will save many unnecessary costs to your trading equity by avoiding the money pit stocks.
Look for what's turning up and avoid what's rolling over and turning down.
IBB
While the short-term action was promising, long-term resistance is winning the battle. Based on my weekly signals IBB looks much more like a short here than a long. It's not quite dead yet, but this is a space to generally avoid until more stabilization is acheived.
GILD
One of the largest components of IBB did not help the group with a big downside earnings reaction on Thursday afternoon. This stock is in clear distribution as we continue to see lower lows and lower highs.
Financials Pause
AAPL
When money rotates out of a stock, the stock declines. It doesn't usually happen all at once. There will be pauses and bounces along the way but the general direction of the stock will be lower; the stock will be down-trending. This is all you need to know. Momentum continues in the direction of the trend until supply and demand find balance. That can often take a long time.
MSFT
MSFT is on the verge of a failed move higher. The reaction from its recent earnings has returned the stock to key support. Should it fail the swing low here near 49ish we will exit our longs and wait for a better opportunity.
Generally avoid what's rolling over. Instead, seek what is no longer declining and beginning to turn higher. You don't have to predict exact highs and lows to make money. You are much better served just trading in the direction of the dominant trend.
USO
Oil is breaking out of a multi-month base. Following the 18-month implosion it appears buyers and sellers are beginning to agree on a stable price. The fact that the commodity has stopped its steady trend lower and is now stairstepping higher is a sign that the trend may in fact be turning.
Tactically it appears the gap at 12.46 will be a first target area should the breakout hold. That suggests additional 10% upside from here as an initial target.
UWTI (3x Long Crude)
UWTI is the vehicle with which I'm currently trading this base breakout in Oil. Being that this is a triple return Crude Oil vehicle, a fill of the gap on USO would equal a 30% rally in UWTI. Certainly this presents more risk, but the upside is there as well.
As you can see above UWTI is breaking its weekly downtrend line and is back above its 20 WMA for the first time since June of 2015.
DWTI (3x Short Crude)
Often I like to see the inverse view of a stock's chart, to see how appealing it would be from the complete opposite alignment. DWTI is the inverse fund to UWTI, meaning it trades triple short the return of Crude Oil.
From the Weekly view above the uptrend support from the last year has broken cleanly. There should be some support kick in between 75-80, but the overall posture is quite negative.
GLD
MUX
Mining stocks have seen some major moves with the rally in the Gold and Silver markets. Here is a stock that I have been trading since the breakout near $1. MUX is up over 150% since January and continues to see positive price action.
The trends are hot right now in the commodity space and while they could likely use a rest soon, the longer-term trends are beginning to turn higher as well. Its possible a new bull market is in the making here.
Biotech Rolling Over
Biotech had the look of a group trying to build some momentum to reverse its downtrend. Unfortunately it continued to struggle shortly after its breakout attempt and is now rolling over from key resistance.
IBB
While the short-term action was promising, long-term resistance is winning the battle. Based on my weekly signals IBB looks much more like a short here than a long. It's not quite dead yet, but this is a space to generally avoid until more stabilization is acheived.
GILD
One of the largest components of IBB did not help the group with a big downside earnings reaction on Thursday afternoon. This stock is in clear distribution as we continue to see lower lows and lower highs.
Financials Pause
Banks finally took a break after a 9 week tear to the upside. It's way early to call an end to the intermediate-term momentum, but should they begin to stall in this resistance area, short signals will come back into focus.
This is a group that will likely suffer greatly from a broad market rollover. Most often prior support areas, when broken, will act as a ceiling for prices on the way back up. It should not surprise anyone that the Banks could cool off after the run they've had. The question will be how does this resolve once the first consolidation takes place? We shall wait and see.
BAC
C
GS
Tech Struggles
C
GS
Tech Struggles
Some of Technology's largest components did not fare well through earnings season. What was looking like a potential leadership group has quickly reversed course and is now very vulnerable.
Big selling is taking place in this group and it pays to acknowledge that.
AAPL
GOOGL
Google remains trapped in this ~$100 trading range. Buyers will need to step up again as support is being retested. Clearly there are strong sellers near $800, this should not be ignored.
MSFT
MSFT is on the verge of a failed move higher. The reaction from its recent earnings has returned the stock to key support. Should it fail the swing low here near 49ish we will exit our longs and wait for a better opportunity.
Generally avoid what's rolling over. Instead, seek what is no longer declining and beginning to turn higher. You don't have to predict exact highs and lows to make money. You are much better served just trading in the direction of the dominant trend.
In order to find the turn in these rotations you have to know what to look for. Stocks mostly top and bottom in a similar way, by spotting the early signs of trend change you can take advantage of many opportunities that will present themselves.
Oil/Metals Rout Continues
Oil/Metals Rout Continues
USO
Oil is breaking out of a multi-month base. Following the 18-month implosion it appears buyers and sellers are beginning to agree on a stable price. The fact that the commodity has stopped its steady trend lower and is now stairstepping higher is a sign that the trend may in fact be turning.
Tactically it appears the gap at 12.46 will be a first target area should the breakout hold. That suggests additional 10% upside from here as an initial target.
UWTI (3x Long Crude)
UWTI is the vehicle with which I'm currently trading this base breakout in Oil. Being that this is a triple return Crude Oil vehicle, a fill of the gap on USO would equal a 30% rally in UWTI. Certainly this presents more risk, but the upside is there as well.
As you can see above UWTI is breaking its weekly downtrend line and is back above its 20 WMA for the first time since June of 2015.
DWTI (3x Short Crude)
Often I like to see the inverse view of a stock's chart, to see how appealing it would be from the complete opposite alignment. DWTI is the inverse fund to UWTI, meaning it trades triple short the return of Crude Oil.
From the Weekly view above the uptrend support from the last year has broken cleanly. There should be some support kick in between 75-80, but the overall posture is quite negative.
DWTI is clearly breaking down after a parabolic rise and large topping formation.
The Monthly view shows this closing below the 20 Month MA for the first time since October of 2014.
Signs continue to point to a more bullish outlook for Crude Oil in the future.
SLV
I've heard the term "overbought" more in the last month than almost any time in recent memory. It is in regard to the Precious Metals and Oil space.
Signs continue to point to a more bullish outlook for Crude Oil in the future.
SLV
I've heard the term "overbought" more in the last month than almost any time in recent memory. It is in regard to the Precious Metals and Oil space.
This completely depends on your investing time horizon. Short-term these groups have seen nearly vertical rises. But zoom the chart out a few years and you will see just how far they could go on the upside if only recovering a portion of the prior decline.
SLV Weekly chart
SLV Weekly chart
GLD
MUX
The trends are hot right now in the commodity space and while they could likely use a rest soon, the longer-term trends are beginning to turn higher as well. Its possible a new bull market is in the making here.
No strategy in the market is perfect, there is no silver bullet (no pun intended). But identifying changes to the supply and demand can be very helpful for determining our current and future investment posture. You don't have to lunge at rapidly declining stocks to buy them "low". When an asset is ready to reverse its trend the price action will stop going down, will build a flat base pattern, and will subsequently turn higher out of that pattern. This is what we want to find across all markets on all timeframes. Base breakouts/breakdowns are the cornerstone of my investment process. See the trend, watch for signs of equilibrium and slowing of that trend, then wait for the break in either direction to dictate your future posture.
Investing doesn't have to be overly complex. If you can read the signs of trend change and relative rotation of funds, it will go a long way to improving your investment returns.
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