{"id":201578,"date":"2024-01-25T08:02:07","date_gmt":"2024-01-25T13:02:07","guid":{"rendered":"https:\/\/ibkrcampus.com\/?p=201578"},"modified":"2024-01-26T10:15:09","modified_gmt":"2024-01-26T15:15:09","slug":"chart-advisor-may-the-force-be-with-you","status":"publish","type":"post","link":"https:\/\/www.interactivebrokers.com\/campus\/traders-insight\/securities\/macro\/chart-advisor-may-the-force-be-with-you\/","title":{"rendered":"Chart Advisor: May the Force Be with You"},"content":{"rendered":"\n<p>By\u00a0<a href=\"https:\/\/links.investopedia.com\/u\/click?_t=36ba8fa8372241d58b3bfc06997a4332&amp;_m=5254f3de87f8465daa8ba8ac014e304b&amp;_e=ZfuUp5oRcl4h_bvDWH9800TEe1Lpks_lhrWO3MVvEZvbAFeqvGM-AnoX06UIt5eyViNg9We5nhw8LrPG1Ks6hIxmrMhyweO1rYrNc08PqxWXiX1zFGRMxRca8zZJmvucGDRFKJKsLO59wiGI-eM_Mow68xq3KfkVWtEFlQvuphPElDb1P317x5OBQVab6ILuaiQk-35mqyn5FWKTEF7iCvvQ6XjcJOiralU2pYZjhPrx6Zb9WZHkT9UN8b77oYHLcPXHeEjPA3qrDmE5JIEidZBc6xlo2PRtxSBlq_l83hF5KGamNHlTHpDiKw1Ed027AuXKeF20qzON9f7LOdU-AHANWQz53yRao8O8DZz7e6vW2ag826TdzGBB63xBKEHOExa51UkdHunDNlwqpP1SP0Gz9iI_ur4GIJtuoSrL-lkh49iVaS4Kf46LS3lOMykBOuJpV-1oobQQGQj4uhSCsA%3D%3D\" target=\"_blank\" rel=\"noreferrer noopener\">David Cox, CMT, CFA, FCSI, FMA<\/a>\u00a0and\u00a0<a href=\"https:\/\/links.investopedia.com\/u\/click?_t=36ba8fa8372241d58b3bfc06997a4332&amp;_m=5254f3de87f8465daa8ba8ac014e304b&amp;_e=ZfuUp5oRcl4h_bvDWH9800TEe1Lpks_lhrWO3MVvEZvEUJnmj5T-rNlMJnFON_n7A52lMRE_3Azzs5whiUijObLJRJ_8k5ktTOZpjm8JpO8OP_ATEQfYgzOQX5RWn53Sgq5YhInNOBPTjj3AEwYIIL6r84RCXuHbxRCInC-6VEp5pWDUTObjFDO5wLmI0rl8rbvoMIwndIgpVWiu5XnM0-iUl0oyy1c7xQOreZbcrNuyEtNvMLsOJO0hmn64NediqTyaQpvIof-wRtIjlpfa-1eVvIX8RIWLP0Vo4_wmyj0w8jeR07X9Xt2MgMO_3-sUJwYrvkruRzFIPCXOrc9Wxa-gQVj3iFLpSoR5a3bCScM-zj_YgJ9d7m-KH-go7rUzhpiK0Q-Ftrc-SZcRaOCMAawurNPqqfLzdAgR0JITzDm3oSGENZ9tkhVOSmvI9mj2J6FiJoiKfzh8LlRVW0AMDpqCtvQ6BaFEtKtayX3pHRI%3D\" target=\"_blank\" rel=\"noreferrer noopener\">Conor White CMT, CIM<\/a><\/p>\n\n\n\n<p><strong>1\/ Uranium Stocks<\/strong><\/p>\n\n\n\n<p><strong>2\/ Offense vs. Defense<\/strong><\/p>\n\n\n\n<p><strong>3\/ Oil &amp; Energy Stocks<\/strong><\/p>\n\n\n\n<p><strong>4\/ Consumer Discretionary \u2013 One Check<\/strong><\/p>\n\n\n\n<p><strong>5\/ Technology \u2013 Two Checks<\/strong><\/p>\n\n\n\n<p><em>Investopedia is partnering with CMT Association on this newsletter. \u00a0The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice. The guest authors, which may sell research to investors, and may trade or hold positions in securities mentioned herein do not represent the views of CMT Association or Investopedia. Please consult a financial advisor for investment recommendations and services.<\/em><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-1-uranium-stocks\">1\/ <strong>Uranium Stocks<\/strong><\/h2>\n\n\n\n<p>Uranium stocks have been in a strong uptrend for most of the past year and just pulled back, against the uptrend on the daily chart (green circle).\u00a0 I like to keep an eye on the \u201cforce\u201d, which is Elder\u2019s\u00a0<a href=\"https:\/\/www.investopedia.com\/terms\/f\/force-index.asp?hid=52e0514b725a58fa5560211dfc847e5115778175&amp;did=11723867-20240125&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=012524\">Force Index<\/a>\u00a0(middle panel) as it allows us to combine price and volume to gauge who is stronger: the buyers, or the sellers.\u00a0 An uptrend is an uptrend, until it\u2019s not.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/01\/1-28-1100x562.png\" alt=\"\" class=\"wp-image-201579 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/562;\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-2-offense-vs-defense\">2\/ <strong>Offense vs. Defense<\/strong><\/h2>\n\n\n\n<p>We can learn a lot about market character by analyzing and using\u00a0<a href=\"https:\/\/www.investopedia.com\/terms\/r\/relativestrength.asp?hid=52e0514b725a58fa5560211dfc847e5115778175&amp;did=11723867-20240125&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=012524\">relative strength<\/a>\u00a0to our advantage.\u00a0 Here, by creating a composite that defines \u201coffense\u201d as the combined technology and consumer discretionary sectors, and \u201cdefense\u201d as utilities and consumer staples and then plotting offense divided by defense, we end up with this ratio that demonstrates risk on, if you will.\u00a0 The relationship made new highs yesterday and we\u2019re in breakout territory above those 2021 highs, which simply offer further evidence of the bull market that we are in.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/01\/2-16-1100x559.png\" alt=\"\" class=\"wp-image-201580 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/559;\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-3-oil-amp-energy-stocks\">3\/ <strong>Oil &amp; Energy Stocks<\/strong><\/h2>\n\n\n\n<p>A simpleton would like to be able to say that if oil prices are rising, then energy stocks should be too, but it\u2019s not always the case.\u00a0 That said, we can see the relationship here.\u00a0 In the top panel, we have crude oil, which continues to consolidate and in the lower two panels, we have two varieties of energy stocks: SPDR Oil &amp; Gas Explorers (<a href=\"https:\/\/www.ssga.com\/us\/en\/intermediary\/etfs\/funds\/spdr-sp-oil-gas-exploration-production-etf-xop?hid=52e0514b725a58fa5560211dfc847e5115778175&amp;did=11723867-20240125&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=012524\">$XOP:US<\/a>) and iShares S&amp;P\/TSX Energy (<a href=\"https:\/\/www.blackrock.com\/ca\/investors\/en\/products\/239839\/ishares-sptsx-capped-energy-index-etf?hid=52e0514b725a58fa5560211dfc847e5115778175&amp;did=11723867-20240125&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=012524\">$XEG:TSX<\/a>).\u00a0 The stocks can be considered to be the higher risk cousin of the underlying and I like to use them as proxies for what the market thinks or is expecting about the underlying, in this case crude oil.\u00a0 Either way, $XOP and $XEG both turned 20EMA\/50SMA bearish (moving average\u00a0<a href=\"https:\/\/www.investopedia.com\/terms\/c\/crossover.asp?hid=52e0514b725a58fa5560211dfc847e5115778175&amp;did=11723867-20240125&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=012524\">crossover<\/a>) in the fall and led oil downwards.\u00a0 There has been no change since.\u00a0 We label a 20-day exponential moving average (EMA) below a 50-day simple moving average (SMA) has intermediate-term bearish.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/01\/3-16-1100x559.png\" alt=\"\" class=\"wp-image-201581 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/559;\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-4-consumer-discretionary-one-check\">4\/ <strong>Consumer Discretionary \u2013 One Check<\/strong><\/h2>\n\n\n\n<p>There are two trends that I like to be aware of when contemplating investment and considering opportunities for risk taking.\u00a0 One is the absolute trend: is the stock, ETF or index trending upwards or downwards?\u00a0 It\u2019s easier to make money in your portfolio by buying stocks that are rising.\u00a0 The bottom panel below shows the SPDR Consumer Discretionary ETF (<a href=\"https:\/\/www.ssga.com\/us\/en\/intermediary\/etfs\/funds\/the-consumer-discretionary-select-sector-spdr-fund-xly?hid=52e0514b725a58fa5560211dfc847e5115778175&amp;did=11723867-20240125&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=012524\">$XLY<\/a>) in a rising uptrend, with higher highs and higher lows.\u00a0 But in the top panel, we see a downtrend, in fact, we see \u201clows for the move\u201d having just been made, and this chart is the $XLY vs. the S&amp;P 500.\u00a0 So while the sector is in an uptrend, the relative trend is down.\u00a0 Generally speaking, knowing that stocks are more risky than diverse sector ETFs, which are more risky than more diverse index ETFs, we can more easily assess where and how much risk to take on.\u00a0 Ideally, we\u2019d invest in securities that are trending upwards, both absolutely and relatively.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" data-src=\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/01\/4-12-1100x556.png\" alt=\"\" class=\"wp-image-201582 lazyload\" src=\"data:image\/svg+xml;base64,PHN2ZyB3aWR0aD0iMSIgaGVpZ2h0PSIxIiB4bWxucz0iaHR0cDovL3d3dy53My5vcmcvMjAwMC9zdmciPjwvc3ZnPg==\" style=\"--smush-placeholder-width: 1100px; aspect-ratio: 1100\/556;\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-5-technology-two-checks\">5\/ <strong>Technology \u2013 Two Checks<\/strong><\/h2>\n\n\n\n<p>Contrast the last example with the SPDR Technology (<a href=\"https:\/\/www.ssga.com\/us\/en\/intermediary\/etfs\/funds\/the-technology-select-sector-spdr-fund-xlk?hid=52e0514b725a58fa5560211dfc847e5115778175&amp;did=11723867-20240125&amp;utm_campaign=chart-advisor_newsletter&amp;utm_source=investopedia&amp;utm_medium=email&amp;utm_content=012524\">$XLK<\/a>) ETF below, and you can see very clearly that technology is in an absolute uptrend (lower panel) and it\u2019s in a relative to the S&amp;P 500 uptrend (top panel).\u00a0 That\u2019s what I like to see.\u00a0 The same analysis can be conducted on each stock in your portfolio.\u00a0 Give it a try!<\/p>\n\n\n\n<p>&#8212;<\/p>\n\n\n\n<p>Originally posted 25th January 2024<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Uranium stocks have been in a strong uptrend for most of the past year and just pulled back, against the uptrend on the daily chart.<\/p>\n","protected":false},"author":186,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21,14,18,6,9,22,23,26,3],"tags":[4950,917,7348,1302,1283,1549],"contributors-categories":[13686],"class_list":{"0":"post-201578","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-commodities","7":"category-etfs","8":"category-macro","9":"category-north-america","10":"category-securities","11":"category-stocks","12":"category-technical-analysis","13":"category-text-articles","14":"category-traders-insight","15":"tag-ema","16":"tag-sma","17":"tag-tsx","18":"tag-xlk","19":"tag-xly","20":"tag-xop","21":"contributors-categories-investopedia"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v26.9 (Yoast 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