A few readers seemed to enjoy my blog from a couple of weeks ago on the subject of “Fallen Angels”. That is, stocks that seem to be forming the beginning of a bottoming process – and should be on your watch list.
I spent a bit of time going through sector ETF’s and country ETF’s looking for similar opportunities recently. While there are always lots of fallen sectors or indices we can look at, I am looking for those that show at least some potential for forming a traditional “Phase 1” consolidation, and hopefully an eventual breakout. For more info on market phases, I’d recommend you read my book Sideways.
Below are a few of the charts that caught my eye. These are not necessarily “buy” candidates – view most of them more as “watch” candidates for your list. I’ve made a few notations with the charts presented. Enjoy!
Emerging markets-no longer submerging?
EEM shows us that the recently “Submerging Markets” may be trying to put in a bottom. A potential head & shoulders bottom – missing the right shoulder – may be in play. A rally through the neckline at around $35.50 may be a bullish sign. A “bullish cross” (50 day MA moving up through the 200 day) occurred on the ETF recently. Sentimentrader.com notes that investor sentiment is getting overly bearish on this index. That’s usually a heads – up bullish sign.
Britain: Tickety-Boo again?
“Brexit” has been in the news lately, pushing the United Kingdom’s index down. Some signs of the stress abating has given the index a little relief recently. EWU has broken its 1-year downtrend, but needs to cross about $16.25 to suggest a successful Phase 1 bottom breakout.
Pharmaceutical sector- returning to health?
The Pharma (DRG chart) sector has broken a 1-year downtrend – but remains below its 200 day MA and below a key technical resistance point at around $525-530 on the chart. A breakout would imply lots of upside for this sector – resistance targets of 550, 570 and the old highs of 610 are possible. Keep an eye on this one.
Natural Gas stocks–about to pop?
The XNG Nat Gas index suggests a Phase 1 bottom is in the works. A move above 575 resistance would verify the bullish crossover and move by the index over its two key MA’s.
Airlines- ready for takeoff?
A consolidation pattern between 200 – 260 has been in place for this US Airlines index since early 2015. DJUSAR is caught in a tight trading pattern. Right now, it appears that the index is bouncing off of that significant support level at around 200—a bounce to the top of the pattern would seem possible. Here in Canada, we can also see some signs of improvement in Air Canada and Westjet, as they break through 1-year downtrends—charts not shown. This is a sector worthy of consideration on both sides of the border.