America is a mess. Stores are closing down because of the pandemic and riots. The stock market is up…..everything is normal.

June 1, 20206 Comments

Today’s title is brought to you by Brooke Thackray, who is not just a good research analyst, but a master of sarcastic wit at times. He emailed me this short comment this morning.

Its always interesting to see the reflection of human emotion and how it plays out on the stock markets. Technical Analysis is actually a form of Behavioral Finance, particularly when it comes to the usage of analytical tools like sentiment indicators. But you can also see crowd behavior and emotional response to current events in sector rotation. Witness the recent rally in gun-related stocks, security, and law enforcement tool manufacturing.

I thought it might be interesting to take a look at these movers, and then to surmise if any of these stocks are worthy of a longer termed play. While the Floyd riots are in full play, it might be expected that these stocks will be forefronts of investors minds – and they can be expected to stay strong. What happens after things settle down is the question. Lets take a look at a few of these stocks with a mid-long termed technical perspective.

Smith & Western

SWBI is an iconic firearms company. Its hard to walk into novelty t-shirt store without finding numerous references to the brand. The chart shows us that a longer termed downtrend may have turned the corner with the recent riot-inspired rally. Continued strength in the sector will add evidence of a potential longer termed bullish move.

 

Gun and ammunition maker OLN has not broken its downtrend.

 

Sprotsmans Warehouse SPWH has really popped. Its coming into resistance near 13.50. Not enough upside vs its overbought chart to inspire an entry for my tastes.

ShotSpotter Flex, is an outdoor gunshot detection, location and alert system. Its security solutions, ShotSpotter SecureCampus and ShotSpotter SiteSecure, are designed to help law enforcement and security personnel mitigate risk and enhance security by notifying authorities of a potential outdoor gunfire incident. Its moved a bit on the Floyd riots, but the stock shows no signs of turnaround for longer termed investors just yet.
Wrap technologies WRTC makes remote handcuffing systems for police. Its right back to the top of its trading range near $8. I wouldn’t buy it here.
Digital Ally DGLY makes body cameras and other video surveillance equipment for police. Sure, it popped recently, but the chart still looks like the dogs breakfast. Longer termed investors should continue to avoid this one.
If  Axon AAXN breaks out of its consolidation, it could prove to be resuming its longer termed uptrend. I’d prefer it to stay above $90 before considering this stock – famous for its manufacturing of tasers.
For those with strong hearts, a couple of facial recognition service companies had massive pops in the past couple of days. Both were in horrid downtrends prior to this event. You’d really want to see these stocks prove they are more than one-and-done rally stocks before considering them. One is Vislink VISL (not shown) and the other is Cemtrex CETX.

6 Comments

  • Hi Keith. Bought some equity on way down in March/April and sold into rally. S&P now over 3000 level four days in a row – have you followed plan and put other 1/3 cash to work?

    Thank you

    Reply
    • My rule is in place to buy–am going to give it another day or so just to see how this Floyd riot thing turns out. It may (but likely won’t) put a bit of pressure on the market. Nothing seems to matter of late. But to your question–we will be adding a bit into value stocks very shortly. Still keeping cash aside though.

      Reply
  • At this point, Marshall Law could be announced in the US and China and the markets would still go up worldwide!! LOL

    You have some interesting setups there… AAXN was a definite i noticed lately, thought you or others might be interested in these “self defense” Symbols setups in the US as well

    RGR, VSTO, AOBC

    Have a great day!!

    Reply
  • Maybe it is time for a new ETF: GUNS
    Mostly guns, ammo, small weapons, physical security companies
    no cyberstuff

    Reply
  • I will buy some SP 500 on Friday. for short time. what do you think about Canadian dollar.

    Reply
    • C$ is at an interesting junction. It is meeting its long termed trendline (down)
      I have been (if I may take a bow here) accurately predicting a lower loonie since it was near 0.80. I sounded like a grumpy old bear, but “facts is facts”. Canada has issues –Take a look at this blog:
      https://www.valuetrend.ca/bearish-on-the-loonie/
      It washed out as you know in March–but now is rebounding–The loonie is meeting that red downtrend line on the blog chart. The Canadian economy (on a relative basis to the USA and other countries), for reasons explained on that blog, is in peril. However–there is a reasonable case that we could see another 2-3 cents rally on the loonie as the USD faces pressure in the near term (election uncertainty, virus and re-opening scares, Floyd riots) – so the trendline could crack temporarily
      Longer term I would follow that trendline. If it can crack and hold it will be good. In its favor are the commodities–which we are largely bullish on. Canada has a high reliance on that sector, so it could help to offset our over leveraged population (see the blog) and our spend, tax and never-exercise-austerity current Federal government.

      Reply

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