Catching the next breakout

December 16, 2019, 6 Comments

There’s something exciting about an early stage breakout. It feels good to have caught the train early. You get the window seat that way!

It’s getting pretty hard to find early stage breakouts lately. I’ve mentioned the emerging markets and Europe on this blog before – but they are past their “early stage” breakout period. Don’t get me wrong, I’m bullish on these areas, and I’m not alone in that outlook.  I’ve made a point of noting them both here on the blog and through my BNN appearances, as well as in recent writings for Investors Digest and Moneyletter. But they are no longer the undiscovered gems they were over the summer.

Gold producers

Right now, there’s a decent chance that gold stocks are in an early stage breakout. Gold itself continues to be in a minor downtrend, but the producers are signalling the potential for a change in fortune for the metal. Note the breakout from the down-flag (minor down trend) on the iShares Gold producer ETF. We recently bought a small portion (2%) in this ETF (XGD-T). We may add to it if it keeps its head above the water. Old highs at around $17/sh will add some resistance to the breakout, but a break of that price would add upside potential. Seasonally, gold and silver can see a bit of strength over the next couple of months, so it’s worth keeping an eye open here.

Energy producers

Oil has been the dogs breakfast for some time. It’s really early yet, but it looks to me that the potential for a triangle breakout on the commodity is in the works. We need more time for that potential to be proven. The iShares energy producer ETF (XEG-T) is still in a larger-picture downtrend. But there have been a few positive signs lately. For example, the high in September took out July’s high, and the low in October took out August’s low. I think that a break of September’s high at around $9.50 on this ETF might be enough evidence to convince me to start moving into the sector.

Typically, the best time to buy energy is around February. The sector tends to move well between February and May, according to Brooke Thackray’s Seasonal timing book. Recent developments may be setting up for that seasonal pattern to play out this time around.


Keith’s yearly off-topic blog


Somebody asked me if I’ll be writing my usual off-topic blog this December. The answer is yes, I will be doing one.  I’ve done an off-topic blog every year for the past decade. Its typically been my most-read blog of the year, which is ironic because its not on technical analysis. I do try to make it thought provoking, if nothing else. I’ve covered many topics in this post-holiday blog over the years. For example, one year I compared trading discipline to athletic training discipline – something I am personally very familiar with from my many years of bicycle racing. Another year, I noted the demise of basic driving skills such as manual transmission usage, comparing that to the investment trends of robo-advisors and black-box trading strategies. Last year I ranted on Canadian politics.

This year, I’m going to get a little political again, but from a different angle. I’ll be looking at the wealth-gap. I’ll note some of my own thoughts on the subject, along with those of French economist Thomas Piketty. I’ll probably post the blog in the first week of January. I’ll give everyone a heads-up on the date. And I’ll provide plenty of warning to let readers know that the blog won’t be covering technical analysis that day – so those who aren’t interested in an off-topic blog can give it a miss. But I do hope that this years topic will inspire some thoughts on the topic. Stay tuned.


    • We’re fairly heavy into the US banks –at least we are for now. Not so much with the Canadian banks. ZWB is in our income platform, but that because we are after the income (covered calls enhance the yield). We view the sector as remaining flat with little neartermed upside, beyond dividends. We own very little CDN bank exposure (3% via one individual bank stock – that’s it) in our conservative growth model.

  • what is energy name to buy? today is 9.45. is the energy going to break out now?

    • Wayne–we own XGD
      We are also looking at some individual gold names. But an ETF is the easy way with less individual stock risk.


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