Seasonality for the month of April is historically the strongest of the year. Fund managers usually sell into the latter days of March to end the quarter, then use the capital to buy the next quarter winners.
Semiconductors have been on a tear since early 2016 and will likely continue as technology becomes even more ubiquitous.
CRUS remains strong, suggesting we could see a continuation of the current trend this week. The company sports a modest PE of 15, on respectable profit margins of 20%. Earnings grew last quarter by 128%. Analysts project growth of 82%, based on the recent sales numbers of +50%. Targets are 62.29 and 64.16 respectively.
The electronic equipment group is also strong. If the technology sector (XLK) continues higher this week, we anticipate ZBRA will break higher out of this descending pattern. RSI is pointing the way.
Materials and Consumer Discretionary are leaders at the moment.
Watch these industry groups for candidates. KMG shows strength as the #1 ranked stock in the group. We are more interested in this name due to its leadership and will use it as a barometer. The stock trades too thin at 55,000 (+/-) shares a day, to consider it as a swing trade. It’s too risky.
FMC Corp was actually the strongest stock in the group, posting a gain of more than 13% on Friday.
In contrast, HudBay Minerals, Inc. (HBM) was one of the weakest in this group, dropping lower into a pattern of lower highs. The 200ma looks like a magnet and one reason we are looking for a quick short, if weakness persists.
Watch List for the Week of 04-03-2017 for reference. TD setups are candidates we will consider for a scalp or day trade. If the TD setup on IDCC for example, provides a great entry in the morning session and the stock climbs into the evening session, we would then consider it for a swing. The test will be the 9/20ema (stop) and if it closes near the high of the day.
The Weekend Video News letter reiterates what we shared with members for the past two weeks. Crude oil, yields, JNK and HYG are our directional indicators. Monitor these assets again this week,
I’ll leave you with thoughts from a recent conversation this weekend. We were discussing crude and the markets in general.
“BTW – long term – WTIC weekly – left side of the chart below – was in the mark down or Phase IV – selling – then weekly IHS started to form – head formed JAN/FEB 2016 “accumulation or Phase I” – right shoulder forming over the past 12 months. The right shoulder suggests “Phase II, markup”. While there is the remote possibility of failure (lower high) on this weekly chart, it probably makes more sense that we move higher, due to supply and demand. Demand because the economy will (hold your breath) improve and produce more jobs which in turn means more cars back on the road and more trucks delivering goods, which in turn means more demand for crude oil products.
Caveat: Trump’s policy of deregulating US oil production could create more supply.
A lower high would come from faltering policies in the “infrastructure trade” faltering policies in the “deregulation of banks” and faltering policies in the “repatriation of capital” back to the US, that has propelled us higher since NOV.
It doesn’t matter if we believe Trump or not, since we cannot trade rhetoric, we must look to the data and what INSTITUTIONS are doing to complete our analysis and game plan. Institutions make themselves known by sheer size, so watching the clues will render better decisions. JNK HYG and Crude are the clues right now…..all of these assets, including the dollar and PRICE ACTION tells a story.
We just need to speak the same language.”
Happy Trading – Vinny
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