XHB and Facebook – 2 Buy Signals

Facebook

The following analysis was published in the October 28 Profit Radar Report:

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Facebook has been ‘wedging’ lower. It is now at triple support, shows a tiny bullish divergence, and cycles are turning strongly bullish. Upon completion, wedges like this are often completely retraced, which means the up side target is around 188. Aggressive investors may choose to buy Facebook.”

Facebook rallied as much as 12.49% since Monday’s low. Cycles continue higher, and (FB) should rally towards and perhaps beyond 188.

SPDR S&P 500 Homebuilders ETF (XHB)

The following analysis was published in the October 21 Profit Radar Report:

The SPDR S&P Homebuilders ETF (XHB) is one of the most hated ETFs right now. In September XHB languished in over-sold territory for 10 consecutive days without bounce. Daily RSI-35 (not shown) is the most over-sold since August 8, 2011. Trade is currently below two (red) long-term trend lines. Trend channel support is around 33.13.There are no bullish divergences. In summary, XHB is down 28.75% since January, and is over-sold enough to spark a powerful spike at any time. However, there are no bullish divergences indicative of a lasting low. Perhaps this will change by the time XHB reaches the black trend channel.”

October 28 Profit Radar Report:

XHB closed below the black trend channel on Friday, but with a bullish divergence. A move back inside the channel (above 32.90 on Monday) and above trend line resistance (33.25 and 33.70 on Monday) could unleash a strong bounce. Aggressive traders may buy accordingly.”

Since Monday’s low, XHB rallied as much as 7.95%. Based on sentiment and technicals, further gains are likely.

The Profit Radar Report monitors key indicators to spot low-risk or high probability opportunies. Click here to subscribe or learn about our approach.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Advertisements

How to Outsmart a Choppy, Range-bound Market

From January 26 to February 9, the S&P 500 lost as much as 11.84%. This initial freefall was followed by a rollercoaster-like performance.

The large February drop (340 S&P points) expanded the trading range and complicated the search for low-risk S&P 500 entries (see S&P 500 analysis).

Hunt for a Better Risk/Reward Setup

In fact, there was no low-risk setup for any of the major indexes. However, the February 11 Profit Radar Report featured the chart below and identified this low-risk sector trade:

The Utility Select Sector SPDR ETF (XLU) dropped as much as 17.22% since its November high. As of Thursday, XLU was deeply oversold while testing a long-term support line. On Friday, XLU jumped 2.10%. The only thing missing as a bullish RSI-35 divergence at the low. The risk/reward for XLU looks more appealing. We will leg into XLU is it drops below 48.40.”

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

We anticipated the S&P 500 to rally from the February 9 low, but ultimately relapse. XLU was a lower-risk vehicle to have ‘skin in the game’ just in case stocks continued higher than expected (runaway insurance).

XLU dropped below the 48.40 buy limit on February 12. Although the ride hasn’t been smooth, XLU never dropped below our entry price (allowing us to ‘play with house money’), and is currently up 3.88% (compared to a 1.30% loss for the S&P 500).

Next resistance is above 50.50, support around 49. Failure to move above 50.50 or a relapse below 49 would be a warning signal.

Although the Profit Radar Report’s analysis is centered on the S&P 500, there are times when it makes sense to think outside the box and go where opportunity takes you.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

Two Diametrically Opposed Sector Opportunities

The S&P 500 is trading at the same level where it was on July 8. Such a 15-week chop zone is pretty boring, but it doesn’t stop there. The S&P hasn’t made any net progress since May 2015.

When the broad market is stale, it makes sense to look at other opportunities.

The Profit Radar Report always scans various markets and sectors for sentiment extremes or seasonal trades with the potential to provide returns independent of the broad market.

Thus far this year, we’ve found such returns in gold, silver, natural gas, small caps, VIX and the utility sector.

Utilities ETF

The October 12 Profit Radar Report pointed out that every single utility sector stock has been below its 50-day SMA for more than five days. An extremely rare oversold condition.

The October 13 Profit Radar Report observed that: “XLU (Utilities Select Sector SPDR ETF) jumped above trend line resistance on strong volume. This increases the odds that some sort of a low is in place. We are buying XLU at 47.80.”

We didn’t want to chase the S&P 500 when it bounced from its 2,120 support level on October 13, but wanted some low-risk exposure to equities.

Being oversold and overhated, XLU fit the bill.

Sometimes there is no particular up side target (as is the case with XLU), but identifying low-risk buying opportunities allows investors to either grab quick gains or hold on and ‘play with house money.’

Bank ETF

The banking sector is approaching a very strong resistance cluster.

The chart of the SPDR S&P Bank ETF (KBE) shows price near trend line resistance, 78.6% Fibonacci retracement, and where wave A equals wave C.

Additionally, there was a bearish RSI divergence at the October 27 high.

Seasonality is bearish for the first three weeks of November.

This doesn’t mean that bank stocks will crash, but it certainly indicates that buying KBE right around 35 is a bad idea.

There is no short bank ETF, but traders may consider shorting KBE or buying inverse ETFs like SEF or SKF. This setup may only lead to a short-term correction.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Is the Dow Jones Transportation Average Forming a Bull Flag?

The Dow Jones Transportation Average (DJT) has been on fire, since late 2012.

A V-shaped correction, and a prolonged period of sideways trading interrupted the parabolic up trend and there’s been no net gain since September 2014.

Trading action since the November 28 all-time high has been contained by a parallel channel, that looks like a flag.

In fact, the DJT may have formed a bullish flag formation.

A bull flag is described as a consolidation period that interrupts a sharp, almost vertical rally. The consolidation range is defined by a parallel channel with a slant to the down side, and tends to separate two halves of a steep rally.

A break above the upper boundary (around 9,150) would be the first step of a bullish breakout, with a measured up side target around 10,000.

Buying against support (around 8,500) is a low-risk buying opportunity to get in on the ground floor. It’s low-risk because the nearby support level provides a clear point of ruin (stop-loss).

Never Miss a Beat! >> Sign up for the FREE iSPYETF e-Newsletter

A break below 8,450 would void the bull flag and allow for much lower prices.

I doubt there’s enough buying power to lift the DJT to 10,000, but trade around 8,500 (or breakout above 9,150) offers some low-risk setups.

The iShares Transportation Average ETF (NYSEArca: IYT) is the most widely traded transportation sector ETF.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

IBB Biotech ETF Drops Into Oversold Territory

The iShares Nasdaq Biotechnology ETF (Nasdaq: IBB) lost as much as 15% since last Friday and is now at a rare short-term oversold level.

Over the last year, there were only four times the RSI 2 dropped below four. The vertical green lines highlight the prior instances. It led to a rebound every time.

The chart also shows strong support (various trend lines and 50-day SMA) just below current trade (330 – 333).

If history repeats itself, IBB should bounce here. But will this time be different?

Sunday’s Profit Radar Report spotted an ominous red candle high and warned that: “The iShares Nasdaq Biotechnology ETF (IBB) saw a high volume reversal (red candle) on Friday. Nothing epitomizes catching a falling knife like picking a biotech high, but this is a development worth watching for aggressive traders. The corresponding short biotech ETF is the ProShares UltraShort Biotech ETF (NYSEArca: BIS).”

 

This red candle high is still in play and volume really picked up during yesterday’s selloff (which could also be interpreted as washout decline).

Biotech shorts already pocketed nice gains, but as long as support holds, odds favor at least a bounce. Only a drop below will unlock further down side.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Simon Says: SPDR S&P Bank ETF (KBE) Gnawing on Key Resistance

The Financial Select Sector SPDR ETF (NYSEArca: XLF) has been leaping from one new recovery high to the next.

But its Wall Street cousin, the SPDR S&P Bank ETF (NYSEArca: KBE), has been stuck in a 12-month trading range.

The chart below plots KBE against XLF. KBE is back at key resistance around 34.

KBE is at an inflection point. Could KBE become the (sector) tail that wags the (broad market) dog?

The December 21 Profit Radar Report showed two S&P 500 projections (one long-term bullish, one short-term bearish) and stated:

Stocks may hit an inflection point once the S&P 500 and Russell 2000 record new all-time highs. Depending on measures of market breadth at the time, we will either scale down (or protect) our long exposure or add to it.”

The S&P and R2K did hit new all-time highs and are close to their inflection point.

I’m not sure if KBE will be the tail that wags the dog, but KBE confirms that the market should be watched carefully for either acceleration or temporary breakdown.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Energy Select Sector SPDR ETF (XLE) Delivers Promising Rally

The Energy Select Sector SPDR ETF (NYSEArca: XLE) lost as much as 28.57% from June to December. Every attempt to go bottom fishing was greeted by further losses.

I was nearly tempted to fish for an oil low in late November, when I wrote that: “Oil failed to make a new low this week, but a marginal new low would likely come with a bullish RSI divergence and the potential for a bottom.”

Two days later (November 28) oil lost 10% in one day and I shared this updated outlook with Profit Radar Report subscribers: “Friday’s 10.4% loss was more than just a ‘marginal new low.’ RSI also confirmed the new price lows. Obviously this decline is stretched, and a rally can develop at any given time, but at this point it’s better to wait for a move back above resistance. The next real support/resistance level doesn’t emerge until around 50, but it appears ambitious to expect oil to drop that far.

Turns out the $50 target wasn’t all that ambitious after all (actual low for crude oil futures was 53.60). It appears like oil will test the 50 level next year. For now, the Energy Select Sector SPDR ETF (NYSEArca: XLE) chart looks more promising than oil.

The December 10 Profit Radar Report stated that: “XLE is near parallel trend channel support and may bounce, but with lacking evidence of a more permanent low in oil prices, going long XLE is risky. A drop below trend channel support followed by a close above would offer a low-risk buy signal.”

The weekly XLE chart below includes the trend channel (purple lines) along with helpful prior support/resistance levels (dashed gray lines).

XLE dipped below the trend channel last week and closed back above it on Wednesday. This is the first encouraging sign for XLE.

Yesterday’s Profit Radar Report spells out what’s needed next for this fledgling bounce to gain momentum.

Simon Maierhofer is the publisher of the Profit Radar Report. The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013.

Follow Simon on Twitter @ iSPYETF to get actionable ETF trade ideas delivered for free.