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TomAspray
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Tom Aspray, professional trader and analyst was originally trained as a biochemist but began using his computer expertise to analyze the financial markets in the early 1980s. Mr. Aspray has written widely on technical analysis and has given over 60 presentations around the world. Many of the... More
My company:
MoneyShow.com
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Charts in Play
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Bi-Weekly Trading Lessons eLetter
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  • Should You Invest In This Unloved Sector?

    Putting his contrarian hat on, MoneyShow's Tom Aspray wonders whether it might make sense now to jump into this sector that has undergone significant corrections since its all-time high in 2011.

    It looks as though the earnings season may be much better than the dour forecasts from analysts just a month ago. Though only 21% have reported earnings as of Tuesday, 67% of the companies have beaten estimates. The recent earnings have clearly been supportive for the market.

    Economic data is also showing some improvement with the PMI Manufacturing Index and New Home Sales out later today. Big earnings announcements are also slated for release after the close, and though the market internals continue to be strong, the major averages do look over-extended on a short-term basis as the S&P 500 is about 20 points above its 20-day EMA at 1859.

    One of the surprises, so far, this year has been the strength of the utilities as the Sector Select SPDR Utilities (XLU) is up over 12% YTD. They were not highly recommended at the end of 2013 and their performance reinforces the merits of having a small exposure to various sectors even if they are not currently in favor.

    This is a good argument for the gold mining stocks as even though the Market Vectors Gold Miners ETF (GDX) has been up 12.6% YTD, it has corrected sharply from its highs. Though some of the individual gold miners are acting better than others, the ETFs are the best bet for a small part of your portfolio, but which one?

     


    Click to Enlarge

     

    Chart Analysis: The Market Vectors Gold Miners ETF (GDX) has just 33 stocks with 67% in the top ten holdings including 14% in Barrick Gold (ABX) and 13.4% in Goldcorp, Inc. (GG).

    • GDX spiked to a new high at $28.03 on March 14, but then reversed to the downside.
    • At Monday's low of $23.04, it was down 17.8% from its high.
    • The weekly chart shows that it has been trading below the 20-week EMA at $24.50 for the past five weeks.
    • The quarterly pivot is at $24.30 with the early April high at $25.34.
    • The weekly on-balance volume (OBV) did form a bullish divergence at the December lows, line c.
    • This divergence was confirmed by the strong move through resistance, line b, in the middle of February.
    • The OBV is just retesting the breakout level and is still well above its rising WMA.
    • On the weekly chart, there is more important resistance at $31.35 with the 38.2% Fibonacci retracement resistance at $33.17.

    The daily chart of the Market Vectors Gold Miners ETF (GDX) shows that the minor 61.8% retracement support at $23.21 was slightly violated.

    • There is additional support at $22.60 with the daily starc- band at $22.54.
    • The daily OBV also broke out to the upside in February as resistance at line d was overcome.
    • The OBV is still holding above this level as the volume has been declining over the past few weeks.
    • On the early April rally, the daily OBV was stronger than prices, which is a positive sign.
    • The monthly pivot for May is tentatively at $24.06 with the daily starc+ band at $25.19.

    NEXT PAGE: How Do the Junior Miners Stack Up?

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Apr 23 2:55 PM | Link | Comment!
  • Why Investors Should Avoid Momentum Stocks

    The rally continued on Monday, and though the market internals were not quite as strong, the McClellan Oscillator rose further to +81, but it is still below the early April high at +88. The Dow Transportation Average once again led the Industrials as it is approaching the all-time highs. The S&P 500's five-day winning streak is the longest since last October.

    The S&P futures have had nice gains since last week but their volume has been declining over the past three days, consistent with a loss of upside momentum. Therefore, I am looking for at least a short-term pullback in the next few days. This should be a buying opportunity in those stocks and ETFs, which are positive technically like the two large-cap ETFs I recommended last week.

    Such a correction would help soothe the market bears and encourage some traders to bottom fish in the beaten-down biotech and Internet stocks. The market is focused on the widely anticipated earnings on Thursday from stocks like Apple, Inc. (AAPL) and Facebook, Inc. (FB), but several other big names report today and tomorrow.

    Many investors are often tempted to buy some of the high-flying momentum stocks that traders love. A look at the charts of Chipotle Mexican Grill, Inc. (CMG) or Intuitive Surgical. Inc. (ISRG) will make it clear how they could seriously damage a portfolio's performance.

    Since Seeking Alpha keeps kicking me out when I include charts the entire arricle can be found here

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: CMG, ISRG
    Apr 23 10:23 AM | Link | Comment!
  • 3 Earnings Stocks Traders Like To Short

    The long weekend has not hit the market with any significant shocks though the Shanghai Composite did lose over 1.5%, but Eurozone stocks are firm. The US futures are higher as the positive tone from last week has continued.

    The strong readings from the market internals discussed in Friday's Week Ahead review makes a new high in the S&P 500 likely over the next month. On a short-term basis, the odds do favor a slight pullback this week.

    There are many economic reports this week that will give us a further read on manufacturing, as well as the housing market. Many traders are betting on weak earnings this week for three stocks in the materials sector, even though the Select Sector SPDR Materials (XLB) is one of the year's best sectors, up 2.8% YTD versus just a 0.9% gain in the Spyder Trust (SPY).

    Do the weekly charts of these three stocks favor the traders' bearish bets or are they likely to get squeezed?

     

     

    Click to Enlarge

    Chart Analysis: The Select Sector SPDR Materials (XLB) tested its 20-week EMA last week before closing the week strongly.

    • XLB tested its starc+ band in early March when it made a high of $48.26.
    • The quarterly pivot at $46.11 (see table) was tested last week before it closed strongly.
    • The weekly starc+ band is now at $49.60.
    • The RS line is rising strongly and is close to new highs.
    • The weekly OBV moved through its resistance, line c, in late January soon after it gave an AOT buy signal.
    • The weekly WMA of the OBV is rising strongly.
    • The XLB has short-term support in $46.70-$47.20.

    Cliffs National Resources (CLF) is a high-yield stock I have been cautioning investors about for several years and most recently in January's 3 Market Dogs Still Barking. It has a current yield of 3.2% and reports earnings on April 24.

    • As of the end of March, there were 51 million shares sold short with a short ratio of 10.8.
    • CLF was down 34.7% in 2012, 30.5% in 2013, and 21.4% YTD, which has made it a real loser despite its high yield.
    • The weekly chart shows a long-term downtrend, line e.

    • The stock completed its bear flag or continuation pattern (dashed lines) in early 2014 as it broke support at line f.
    • The stock has just turned down from its declining 20-week EMA.
    • The relative performance also shows a pattern of lower highs and lower lows.
    • The RS line has just tested its declining WMA.
    • The weekly on-balance volume (OBV) broke its support (line h) in the middle of January confirming the price action.
    • The recent rally failed below the quarterly pivot at $21.44 with the monthly projected pivot support at $16.11.

    Two More Stocks To Watch

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Tags: SPY, CLF, AKS, ACI
    Apr 22 1:18 PM | Link | Comment!
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