ONE EGG Scan for November 19th

Sectors Worthy of Attention: 

Uranium (URA)¬†Got the big lift higher last week on the¬†comments about building nuclear power again¬†around the world and¬†the price jumped more than 20%. The action redefined a reversal on the move.¬†Thanks to the comments from Japan about restarting their nuclear energy fleet. CCJ is the company who announced the plans for the 48 reactors in Japan. There are only 11 stocks in the ETF fairly easy to scan for the leaders.¬†Tested lower and then follow through on the upside… Clear $14.20 on the way higher.

Energy (XLE) is still reacting to oil as it attempts to define direction among the speculation.¬†The stocks¬†remain near¬†the $86 level¬†and working.¬†Worries returned as Saudi Arabia made statements to not worry about prices… plenty of supply. That speculation had a new spin on Friday with OPEC supposedly willing to cut supply. Oil retraced back below the $75 mark and USO is testing the previous lows again. Two inside days for crude… resulted in a selling day. Still a negative place overall.¬†ETFs to Watch: USO, XOP, OIH, IEO, ERX or ERY.¬†

Basic Materials (XLB) Рcommodities, and the energy sector have been a weight on the sector, but it setting up technically and cleared the $48.50 level. ETFs to Watch: XLB Рmade move above $48.50. Hit the entry point and nice follow through on the move. Nice follow through on the move higher and posted 1.2% gain on Tuesday.

Consumer Discretionary/Retail¬†broke higher¬†last¬†week, but tested lower on Monday… what happens now?¬†A move through the $68 level on XLY¬†got the¬†upside catalyst¬†from earnings and looks ready to move higher.¬†XRT is of interest as well with the move above the $90 level being tested curretly. Still like the outlook through the first quarter.

Biotech fell last week in response to the elections on belief the Republican controlled Senate would attempt to make changes in the Affordable healthcare bill. Reality of that happening short term is not great assuming a President who passed the legislation is still in the White House. Could present opportunity on the selling short term. ETFs to Watch: IBB, BIB, BIS, XBI. Need to be patient and let this consolidation unfold. Attempted to bounce on Monday, but failed to hold the move? Bounced again on Tuesday and held the move higher. Still in the consolidation range.

SOXX – Semiconductors¬†completed the ‘V’ bottom pattern and is stuck in small trading range looking for the upside catalyst.¬†This can still go either way, but the move Friday boost the outlook on the upside as the technology sector rallied overall. You can trade SOXX, SMH or SOXL on the break higher in the sector. Left a doji candle on Monday? Directional change… yes on the upside with a nice break higher from the consolidation.

Commodity Grains (JJG) The sector has been lagging overall, but has been of interest the last couple of weeks as it has attempted to complete a cup and handle break higher. $38 is the level to watch short term for the move. Got the move higher last week and pushing through to breakout from the pattern. (DBA also showed a positive move to confirm) MOO has been leading with the Agribusiness stocks moving higher. WEAT on move on break of cup and handle pattern Friday and testing currently. Need follow through.

UGAZ – natural gas made another bottom reversal following some selling last¬†week.¬†Got¬†the follow through and trade opportunity on Monday. ($14 potential entry to trade.) Gapped through that level on the open, but still offered a reasonable entry at the $14.70 level. $16.30 resistance is the level to watch now. Doji close and setup for continuation or test… this could offer a trading opportunity on the results.

MLPs Рmade solid move across the sector. AMLP, CTR and MLPL all made solid moves on the upside. Sector to watch going forward.

Global gained upside traction last week, but¬†… YINN, TUR, EWH, EWJ, EWL, EWS, EWN, EWT – all tested the moves.¬†Watching to see how the global markets settle near term. EWG brokeout on Tuesday as Europe rallied on the economic data.

Running the Daily EGG Scans: 

FXP – short China. Two days of news in China over economic data and the sellers have stepped in with a big stick to sell off the stocks. If I were a good analyst I would say the downside is in play… but, I do believe the upside has a better chance short term to bounce off the lows currently or support. The selling may resume, but oversold.

SOXL – semiconductors made a solid move higher to break from the consolidation pattern. Buying opportunity posted on the pattern trading model this morning and got the entry at $115 today. Hit near the $119 resistance on the day and we will watch how this follows through tomorrow.

CURE/XLV/FXH – healthcare got a bump first from biotech (IBB/XBI) which faded with the day, but pharma (PPH/IHE) added to the upside as the day progressed on merger deals. Still like the sector outlook long term, but the short term trading opportunity is too up and down at this point for the EGG scan. Excellent follow through on Tuesday for the entire sector and sub-sectors.

SCO – short oil trade showed up again as the commodity retraces the gains from last week rumors about OPEC. The downside oil move is a trade only, if it breaks support at this level currently the downside could accelerate short term.

SPXL – S&P 500 index made nice upside move to breakout today. Follow through on the move will be key for the index as well as the broad markets overall. l

Breakout move for the several sectors… Semiconductors and healthcare. Now what happens? Fake out or follow through? This is where we have to be patient and see how this unfold the balance of the week.

Current EGG Proposed:

* Adding GDX to the table on the move in the price of gold. The miners offer better upside potential is GLD moves to the short term target of $119.50. The dollar will play a role in the price of gold as the test lower in the buck has been a positive for gold. Throw in some positive global news helping the euro and other currencies near term. Be disciplined with your entry and don’t chase a gap open.

Previous Posts:

1)  ITB РHome Construction wants to break from consolidation and looks ready to move higher. Positive news in the sector the last two weeks has been keeping the upside as a possibility. Hit the entry and we have left the trade posted on the table. We did not get executed in the trade due to volume issues for the size we were trading. Very thin volume on the test and could not get the fill we needed on the trade. If you took the entry manage it out based on the post. Use stop of $24.70 currently. Holding above the $25 mark currently.

2)  YINN РChina was attempting to reverse off the recent lows, but the economic data keeps stalling the starts on the upside. Double bottom pattern with a consolidation on the breakout is the current look, but that is testing lower again. Need a follow through catalyst to push the sector through resistance and maintain the move higher being attempted short term. Solid economic data from China on Monday put this back on the radar and added a 1/2 position. ETFs to Watch:  Entry YINN $30.70 or FXI entry $39.50. ADDED see table. 

Friday’s move failed to hold on Monday as worries relative to Japan’s economy slipping into a recession level for the data. Ripple effect through the region was not pretty as the ETF dropped 3% on FXI and nearly 6% on YINN. Watching to see how it unfolds on Tuesday.

Tuesday was mirror day to Monday as the housing data in China pushed investors to the sidelines relative to the country. Hit our stops below the posted level and took the exit today. I am of the opinion this will bounce back, but we have to follow the strategy laid out by the model. Watching to see if it presents another opportunity near term.