Ask me anything

Welcome to the third “Ask me anything” themed blog. BTW—you may be interested in knowing that I began writing the blog in 2008 – so the blog is officially over a decade old! Older blogs can’t be retained because of storage space on the site, but if you do the math – given that I’ve been pumping out 2 blogs a week for some 11 years now—I’ve written somewhere near 1140 blogs over that period. Man, that’s a lot of blogs!

The blog started off as a way to promote my first book, SmartBounce (the blog used to be called the “SmartBounce” blog and had its own website separate from the ValueTrend site). The reader count started off in the “tens”. No joke.  It was mostly just a few dozen of ValueTrend’s clients who read it. Now, we have some 3500 individual hits (not including repeats or multiple blog reads) per month. Clearly, this blog appeals to enough people to merit its upkeep.  

I’d encourage you to forward this blog and mention it to others. The benefit of doing so is that new readers creates a larger community to draw comments and discussion from. And, it encourages me to continue producing high quality blog content with such diligence. Believe me, I feel some sort of obligation to my regular readers to produce worthy content on a regular basis. This is why, even when I am on vacation- I publish my weekly blogs. It’s all for you, baby!

Anyhow – on with the show. Last week I asked for reader questions, and received a few that would appeal to a broad cross section of investors. I’ve paraphrased the questions to keep them to the point. Here they are, with my responses:

Dave asks – Could oil go to $55 or lower? What is my outlook for crude?

Technically, oil shows signs of rolling over from an overbought level. Stochastics (second pane below price chart) is rolling over, while MACD is not yet crossing negatively. You can see that when both of those indicators rolled up from oversold levels at the beginning of this year – oil moved strongly up. We do not have full confirmation of MACD rolling over, we have not quite reached the next significant resistance level of $70 – AND we don’t yet have an change from positive moneyflow (top pane over price chart, and first pane under it). Moreover, the seasonal period is over for oil. Thus, my thoughts are that we will see some pullback to as low as $55 support. If $55 breaks, sure, we could see lower prices. But for now, that would be the most likely target. For now, I am not buying oil, or the producers.

James asks – How do you trade ranges if the highs and lows are less confined (eg higher highs and lower lows)?

When you see erratic lows and highs, you are probably not looking at a truly range bound stock. It may have the rough look of a range bound security, but its problematic because there are less “knowns” for picking support and resistance levels. I like to know my buy and sell levels before entering such a trade. A consistent low (support) level on the chart also provides a strong sell signal when broken. Not so much with an erratic pattern. The best advice I can give is – avoid erratic patterns. They are too hard to trade.

Paula asks — What is my opinion on financial – tech stocks like MasterCard, VISA or even Square? She also asked about my TSX vs SPX outlook.

As far as the ever trending credit card stocks MA and VISA – well, its pretty simple. The trend is your friend until the end. We own MA – and we peel some out of it to keep it at a 5% weighting in the portfolio if it starts to outperform the rest of the portfolio. Square is a different matter. The stock is looking rather broken. The trend is not your friend on this one. Lower high, below the 200 day…all of that stuff means a questionable outlook for SQ.

As far as the TSX vs. SPX question goes- you may have read my recent bit on the economic outlook for Canada. If you haven’t  – give it a quick read here. But we are here to talk technical, so let’s look at the charts.

Truthfully, it’s a hard call to make – deciding which of these two charts looks technically more attractive. On the one hand, you have the strong uptrend on the SPX that may (or may not) have come to an end. So there is a potential that, despite the much better economic news out of the USA- much of that is reflected in current pricing. How much better can it get for the good old USA? Excess is often corrected, so it may be that the SPX floats range bound within the highs and lows established in 2018.

Ask me anything!

On the other hand, the TSX has been in a very slow growth pattern. Yet, it’s faced the same range bound conditions that the SPX has since early 2018. So I don’t see much of an edge here – despite there being less “excess” to wash out. The lower performance of the TSX is not so much a case for it being an undervalued index. The bottom line is –as noted in the blog linked above – there was less growth and less future potential grown to reflect an equally bullish environment to the USA. Meanwhile, the CDN dollar is definitively more bearish than the USD. So, even if the two indices more or less perform at a similar pace – I’ll still give the edge to the SPX –given that we might make a few percent returns on the currency exchange.

Dave asks – Is gold, or the gold producers ETF (XGD) a good buy right now?

Back in January, I noted on this blog that gold was set up for neartermed rally to possibly $1360. I was right about that short termed rally, and my target of $1360 was almost hit. That’s a target that has hit, and failed, and hit, and failed…for a long time! The chart below updates the one I posted in January – and notes that, once again, gold set up to fail at around the $1360 mark as the momentum indicators rounded from overbought levels. Not coincidentally – right at the $1360 target.

I didn’t bother printing the XGD chart – because there is no point. The XGD chart follows gold reasonably closely. Gold is a simple trade. Buy at or near the green horizontal support line on the chart ($1175) so long as you get a corresponding hook up from oversold momentum indicators. Sell at ….wait for it….$1360 or near that level—especially on momentum signals.

Keith on BNN next Monday June 3rd for the 6:00PM show

Keith Richards, Valutrend

Keith appears regularly on BNN Bloomberg MarketCall to answer viewer questions on the technical analysis of stock trends, and to provide unique insights on the factors of technical analysis used in successful investment management. (Note: Times and Dates may be subject to change)

If you have questions about the technical analysis of stock trends for individual stocks, be sure to phone in with your questions for Keith during the show. Call Toll-Free 1-855-326-6266. Or email your questions ahead of time (specify they are for Keith) to

9 Comments

  • Hi Keith,

    Regarding the Gold trade,
    Let’s say you entered around 1175 and haven’t sold yet because it didn’t hit 1360.
    Now that it is in a daily downtrend, what does an experienced technical analyst do?
    Do you wait for a bounce to reach your target (repeat of Jul17 and Dec17)?
    Or you sell since it was close enough to target and expecting to go down to next major support?
    Or else?

    Thanks for your very informative blog!

    Reply
    • Francisco–next support is about $1230 or thereabouts. No guarantee that will hold. If I held it–and this is just me–you need to do what you feel best–but if I held it–I’d sell and look for the next trading opportunity on something better. I think it will take a bit for gold to complete the selloff, bottom, then rally. Having said that, it may not have a ton of downside–heck, it could even trade sideways from here–but it think it has less opportunity than other trades–and cash never hurts in this kind of environment either, as you wait for the next opportunity.

      Reply
  • Thanks so much, Keith. You provide so much to readers in this blog and I try not to miss any posts.

    Reply
  • Hi Keith, love what you do!
    Looking for a US con staple in Can un hedged
    Your Thoughts

    Reply
    • If you want an unhedged version–you should simply go tot eh SPDR XLY units on the US exchanges–no sense buying something on the TSX with lower volume. Not sure there is one anyhow.

      Reply
  • Hi Keith, In your Performance Blog, your benchmark compares to the American Index.
    Can you please define what is the American Index…?
    Best….nadir

    Reply
    • The North American index is a compilation of 85% TSX300 weighting and 15% S&P500 weighting. Its composition is noted in the footnote at the bottom of the page

      Reply

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