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Extremely heavy volume that accompanies a gap higher and a reversing candle after a lengthy uptrend is typically a sign of buyers’ exhaustion and a much more aggressive group of sellers. The longer and more impressive the rally leading up to the reversal, the more likely the top may last for a significant period of time. Check out the daily chart Friday on the Dow Jones U.S. Semiconductors Index ($DJUSSC):

I wrote about this group in our Friday EarningsBeats Digest newsletter and declared a short-term top, possibly even an intermediate-term group. A seasonality chart that backs up a possible fall based on technical data is as follows:

This seasonality chart covers the past 12 years, or since 2013, and it’s a relative chart – illustrating how the semiconductors perform RELATIVE to the S&P 500. 2013 is the year that this secular bull market began and semiconductors have been a HUGE reason why the last dozen years have been so strong. If you look closely at this seasonality chart, you’ll see a pattern where this group LOVES the second month of each calendar quarter. The stock market itself tends to perform best in the first month of calendar quarters. Semiconductors are different, however, and the following illustrates this point:

Relative Performance of Semiconductors By Month of Calendar Quarter

Month 1 (January, April, July, October): -1.0%Month 2 (February, May, August, November): +13.3%Month 3 (March, June, September, December): +3.4%

Care to guess when you should consider being overweight semiconductors? Hopefully, it’s obvious.

NVIDIA Corp (NVDA) is the primary leader in semiconductors and here’s its seasonal performance since 2013:

Keep in mind that this seasonal chart is based on NVDA’s absolute price performance, not relative. Here’s the NVDA breakdown by months of calendar quarters:

Month 1 (January, April, July, October): +16.2%Month 2 (February, May, August, November): +40.2%Month 3 (March, June, September, December): +6.9%

My rationale for the strong semiconductor performance in second months within calendar quarters is that NVDA typically reports earnings in the second month of calendar quarters. For example, NVDA reports its next earnings on August 21st (2nd month in Q3). The pre-earnings moves to the upside occur later for NVDA than many other stocks, because others tend to report their results in the first months or very early in the second months of calendar quarters. Therefore, the timing of accumulation can be quite different.

In my opinion, the semiconductor trade is WAAAAAAY too crowded now. I’ve made money there and am now planning to stay away. Instead, I’m going to focus on areas showing strength that also perform well during the first months of calendar quarters. After all, July is the first month of Q3 and it’s rapidly approaching. As money rotates away from semiconductors, there’ll be a ton of money finding a new home.

Opportunity Ahead

I firmly believe that the current secular bull market isn’t going to end. Instead, as semiconductors weaken, other areas will step up to help carry the load. One sector, somewhat forgotten currently, has generated nearly all its gains over the past 20 years from the first months of calendar quarters. And one stock within the sector LOVES the month of July, rising 14 of the last 15 years and producing an average July return of 5.6% over the past 15 years. I see a big month ahead and will be providing the stock Monday in our FREE EB Digest newsletter. If you’re not already an EBD subscriber, CLICK HERE to start your subscription for FREE (no credit card required) and receive the stock on Monday.

Also, for more trading ideas ahead as money rotates, please review my Weekly Market Recap video at YouTube this weekend, “Semiconductors See A Euphoric Top, Opposite George Week Works Again!”.

Happy trading!

Tom

The markets consolidated throughout the past week; the week was a shortened one with Monday, June 17th being a holiday on account of Bakri Eid. The past five sessions saw the markets staying in a capped range throughout the day. Even when the Nifty kept marking incremental highs, the intraday trend remained practically absent. The volatility also did not change much as compared to the last week. The India Vix inched higher by just 2.79% to 13.18 on a weekly basis. The weekly trading range for the Nifty too remained much capped. The index oscillated in just 268.90 points range before posting a negligible weekly gain of 35.50 points (+0.15%).

The coming week is an expiry week for the monthly derivative series. Besides this, over the past sessions, the markets have exhibited clear signs of fatigue. It has frequently formed weak candles on the daily chart raising possibilities of it taking a breather and showing some measured corrective retracement.  Going by the derivatives data as well, Nifty might face strong resistance in the 23600-23650 zone. This would mean that even if modest upsides are seen, a sustained and trending upmove cannot be expected unless the zone of 23600-23650 is taken out convincingly. Therefore, all moves on the upside should be used for guarding profits at higher levels.

A quiet start to the trade is expected on Monday; the levels of 23650 and 23790 may act as resistance points for Nifty. The supports come in at 23300 and 23180 levels.

The weekly RSI is at 68.54; it continues to show bearish divergence against the price as it is not marking fresh highs along with the price. The weekly MACD is bullish and stays above the signal line. A spinning top has emerged on the candles. This not only reflects the indecisiveness of market participants but such formations also have the potential to stalling an ongoing uptrend if they are formed near the high point.

The pattern analysis shows the Nifty trying to break above the small rising channel that it has formed. However, the Index is seen forming incremental highs but it is unable to achieve a clean breakout. Unless the zone of 23600-23650 is taken out convincingly, the markets may find it difficult to have a sustained and trending upmove.

All and all, the current technical setup shows a lot of indecisiveness, discomfort, and tentativeness of market participants. The present structure warrants that we do not chase the up-moves blindly; instead, unless a trending move takes place, we utilize these moves to guard profits at higher levels. It would be prudent to protect and take profits in the stocks that have run up too hard and rotate the investments into the stocks that is showing promising chart setup along with improving relative strength. While keeping leveraged exposures at modest levels, it is recommended to rotate the investments effectively while maintaining a cautious view on the markets for the coming week.

Sector Analysis for the coming week

In our look at Relative Rotation Graphs®, we compared various sectors against CNX500 (NIFTY 500 Index), which represents over 95% of the free float market cap of all the stocks listed.

Relative Rotation Graphs (RRG) show that the Nifty Metal Index is giving up on its relative momentum while staying inside the leading quadrant. Besides this, the Realty, Consumption, Auto, and Midcap 100 indices are also inside the leading quadrant. Collectively, these groups may relatively outperform the broader markets.

The Nifty Infrastructure, PSE, PSU Banks, Energy, and Commodities Index stay inside the weakening quadrant.

The Nifty Pharma index has entered the lagging quadrant. Besides this, the Services Sector Index and IT Index are also inside the lagging quadrant. The Services Sector Index appears weaker; however, the IT and the Pharma Index are seen improving their relative momentum against the broader markets.

Banknifty, Nifty Media, Financial Services, and FMCG indices are placed inside the improving quadrant.

Important Note: RRG™ charts show the relative strength and momentum of a group of stocks. In the above Chart, they show relative performance against NIFTY500 Index (Broader Markets) and should not be used directly as buy or sell signals.  

Milan Vaishnav, CMT, MSTA

Consulting Technical Analyst

www.EquityResearch.asia | www.ChartWizard.ae

Last week, the broader market Indices hit another new high on Thursday before pulling back into Friday’s close. Not all areas participated, however, as the recently explosive move into AI stocks ran into trouble later in the week. Instead, many of last week’s top performers were down-and-out stocks that are now in the beginning stages of reversing their downtrends.

Just take a look at the top performers in the Dow Jones Industrial Average, which posted a 1.5% gain for the week vs a flat finish for the Nasdaq. Among the winners were Cisco (CSCO), McDonalds (MCD), and Nike (NKE) which are each trading well below prices from earlier this year. Last week, they averaged gains of 3.5%, yet they still have work to do before regaining their uptrends.

Below are two stocks that are further along in their downtrend reversals; however, one has more positive characteristics that point to further upside, while the other has more work to do. Let’s review.

Daily Chart of MasterCard (MA)

As you can see in the daily chart of MasterCard (MA) above, the stock has closed the week back above its key 50-day simple moving average. The fact that this move above resistance occurred on heavy volume is quite constructive, as it indicates possible institutional sponsorship.

Other positive factors are at play as well, such as the fact that the RSI is now in positive territory. In addition, the seasonality for Mastercard is positive, as the stock has gained in the month of July — 1 week away — each of the last 10 years. However, while the MACD has posted a bullish crossover, with the black line up through the red, it remains in negative territory.

Daily Chart of Hilton (HLT)

Hilton (HLT) is another stock that’s entering a seasonally strong period. The stock began its downtrend reversal in mid-June, with the RSI turning positive as the stock closed above its 50-day moving average. In addition, the MACD turned positive at the same time, which provided further confirmation. Perhaps most important, however, is that Hilton announced an expansion plan that will double the number of their “lifestyle” hotels over the next four years.

The expected growth pushed the stock higher so that, last week, HLT entered a strong buy zone after breaking out of an 11-week base on volume. Also highlighted above is the early May downtrend reversal attempt, which was not confirmed by a positive MACD, nor was there positive news regarding growth prospects.

While much of my work involves spotting high growth stocks that are advancing toward base breakouts, downtrend reversals, such as Hilton (HLT) above, play a key part as well. Vertex (VRTX) is a prime example, as the stock was added to my Suggested Holdings List in early May as it began a new uptrend amid news of a new non-addictive pain medication.

A move above key resistance that’s confirmed by a positive RSI and MACD, coupled with bullish corporate news, can yield some top performers. While Mastercard (MA) is interesting, the stock still has work to do before gaining my confidence.

If you’d like to be alerted to top stocks poised to trade higher, use this link here to trial my twice weekly MEM Edge Report. You’ll also be kept on top of broader market conditions as well as sector rotation into newer areas of the market. Use the link above to see what others are raving about!

Warmly,

Mary Ellen McGonagle, MEM Investment Research

In this StockCharts TV video, Mary Ellen reviews the broader markets, takes a close look at NVDA and other year-to-date winners that sold off last week, and shares top candidates in the Consumer Discretionary sector.

This video originally premiered June 21, 2024. You can watch it on our dedicated page for Mary Ellen on StockCharts TV.

New videos from Mary Ellen premiere weekly on Fridays. You can view all previously recorded episodes at this link.

If you’re looking for stocks to invest in, be sure to check out the MEM Edge Report! This report gives you detailed information on the top sectors, industries and stocks so you can make informed investment decisions.

Moving averages are a crucial charting tool, but many of us aren’t getting the most out of them. In this edition of StockCharts TV‘s StockCharts in Focus, Grayson shows you how to enhance your moving averages with 4 unique charts, straight out of his own account. You’ll learn how to customize the styles of your moving averages to visually prioritize the ones that matter most to you and stay focused on the most important elements. Plus, Grayson will show you how to quickly pull up each of our 4 sample charts right from the SharpCharts Workbench.

This video originally premiered on June 21, 2024. Click on the above image to watch on our dedicated StockCharts in Focus page on StockCharts TV.

You can view all previously recorded episodes of StockCharts in Focus at this link.

Who would have thought a mid-week break would halt the stock market’s winning streak? Maybe the hot PMI reading leaked, or traders and investors felt the stock market was getting so toppy that it was time to take some profits from the high flyers.

No Selloff Follow-Through

Thursday’s selloff impacted large-cap semiconductor stocks the most. NVIDIA, Inc. (NVDA) dropped over 3% and closed the week down just over 4%. Broadcom Inc. (AVGO) has been selling off since Tuesday, ending the week lower by 4.40%.

Click here for live chart.

Thursday’s selloff impacted large-cap semiconductor stocks the most. NVIDIA, Inc. (NVDA) dropped over 3% and closed the week down just over 4%. Broadcom Inc. (AVGO) has been selling off since Tuesday, ending the week lower by 4.40%.

This semiconductor weakness can be seen in the VanEck Vectors Semiconductor ETF (SMH) chart below.

CHART 1. DAILY CHART OF THE VANECK SEMICONDUCTOR ETF (SMH). The bearish engulfing pattern was an indication that further selling is likely to take place, and a reversal could be on the horizon. However, SMH managed to hold on to its 10-day EMA.Chart source: StockChartsACP. For educational purposes.

SMH closed barely above its two-week exponential moving average (EMA). An important point to note is that Thursday closed with a bearish engulfing pattern. It’s only natural for technical analysts to think that the selloff would continue into Friday. It did initially, but reversed, closing with a candlestick that resembled a doji. This indicates investor indecision.

Overall, Friday’s price action was relatively quiet, a surprise after the previous day’s selloff and for a quadruple witching day. This indicates that investors aren’t rushing to sell off just yet. The stock market is still very bullish, for good reason. There have been no signs of any slowing down in economic activity.

If you look at a short-term moving average, such as a two-week (10-day) EMA, it’s clear that the S&P 500 has been trading above it for most of June. The Nasdaq Composite ($COMPQ) displays a similar picture.

Click here for live chart.

Overall, both indexes look like their strong uptrend is intact. The Dow Jones Industrial Average ($INDU) is the one that has struggled lately, although it closed above its 10-day EMA on Thursday and Friday.

CHART 2. DAILY CHARTS OF S&P 500, NASDAQ COMPOSITE, AND DOW JONES INDUSTRIAL AVERAGE. All three indexes have the legs to carry the bull run further.Chart source: StockChartsACP. For educational purposes.

Nothing has changed the bullish sentiment of the stock market. While semiconductor stocks sold off, stocks in other sectors did well. Healthcare stocks such as Gilead Sciences, Inc. (GILD), Sarepta Therapeutics, Inc. (SRPT), and Zealand Pharma (ZLDPF) saw strong gains.

All Quiet On the Weekly Front

There’s not much economic data next week except for the PCE. The bigger attraction will probably be Micron Technology, Inc (MU) earnings. The stock had a nice run from mid-April until Thursday, when it plunged hard following its semiconductor cousins. Wall St. analysts expect $0.51 earnings per share and revenues of $6.66 billion. If MU beats estimates, it could boost tech stocks. Investors who missed out on the chip rally may have an opportunity to buy on the semiconductor dip if MU delivers. Micron announces earnings on Wednesday after the close. It’s all about timing!

Bonds were relatively flat this week after last week’s strong rally. Overall, the uptrend is still in play, with a series of higher highs and higher lows. It’s probably not time to invest in the bond market, but it’s worth watching the price action. It can often act as a leading indicator if it shows a strong move in either direction.

The bottom line: Next week, watch Micron’s earnings results on Wednesday after the close and Friday’s PCE number.

End-of-Week Wrap-Up

S&P 500 closes up 0.61% for the week, at 5464.62, Dow Jones Industrial Average down 1.45% for the week at 39,150.33; Nasdaq Composite closed flat for the week; down 0.23% at 17,689.36.$VIX up 4.72% for the week at 13.20Best performing sector for the week: Consumer DiscretionaryWorst performing sector for the week: UtilitiesTop 5 Large Cap SCTR stocks: NVIDIA (NVDA); Super Micro Computer, Inc. (SMCI); MicroStrategy Inc. (MSTR); Vistra Energy (VST); Sea Ltd. (SE)

On the Radar Next Week

April Case-Shiller Home PriceMay New Home SalesMay Durable Goods OrdersQ1 Final GDP IndexMay PCE Price IndexMicron Technology earnings

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

In this edition of StockCharts TV‘s The Final Bar, Dave recaps a day where technology shares struggles, with leading names like NVDA and MU dropping bearish engulfing patterns to indicate short-term distributions. He also addresses the ongoing divergence between large caps and small caps, the upside potential for energy stocks, and a bullish divergence for GILD.

See Dave’s chart showing a bearish candle pattern for QCOM here.

This video originally premiered on June 20, 2024. Watch on our dedicated Final Bar page on StockCharts TV!

New episodes of The Final Bar premiere every weekday afternoon. You can view all previously recorded episodes at this link.

In this edition of StockCharts TV‘s The Final Bar, Dave answers viewer questions on using technical indicators on leveraged and inverse ETFs like SOXL and SOXS, buying breakouts below the 200-day moving average, upside targets for gold, and whether the $USD is in a primary uptrend.

See Dave’s weekly chart of GLD here.

This video originally premiered on June 21, 2024. Watch on our dedicated Final Bar page on StockCharts TV!

New episodes of The Final Bar premiere every weekday afternoon. You can view all previously recorded episodes at this link.

Editor’s Note: This article was originally published on November 21, 2022.

This article has absolutely nothing to do with trend following or the markets. I have two friends; one whose birthday is June 21 and the other whose birthday is December 21. The one in December always said she got shortchanged because she thought it was the shortest day of the year. I wrote this for them. Enjoy!

Let’s begin with some things you need to know.

What we think we know: The shortest day of the year is December 21st (or very close to then) and the longest day of the year is June 21st (or very close to then).

Tropic of Cancer, latitude approximately 23°27′ N of the Equator. This latitude corresponds to the northernmost declination of the Sun’s ecliptic to the equator. At the summer solstice in the Northern Hemisphere, around June 21, the Sun attains its greatest declination north and is directly over the Tropic of Cancer.

Tropic of Capricorn, latitude approximately 23°27′ S of the Equator. This latitude corresponds to the southernmost declination of the Sun’s ecliptic to the equator. At the winter solstice in the Northern Hemisphere, around December 21, the Sun is directly over the Tropic of Capricorn.

Kepler’s Laws of Planetary Motion

All planets move about the Sun in elliptical orbits, having the Sun as one of the foci.A radius vector joining any planet to the Sun sweeps out equal areas in equal lengths of time.The squares of the sidereal periods (of revolution) of the planets are directly proportional to the cubes of their mean distances from the Sun.

It is Kepler’s 2nd law that we need to understand. Below is an example of this law where the elliptical planetary movement sweeps out equal areas in equal time.

Left side Right side

(Please reference Image 2 to help understand the next two paragraphs.)

Hence, when the Earth is closer to the Sun (left side) it is sweeping a much larger arc than when it is further away from the Sun (right side). Here is another tidbit most do not realize. When the Earth is closest to the Sun (left side) the northern hemisphere is experiencing winter (December 21) because the tilt is away from the Sun and the Sun is over the Tropic of Capricorn. When it is further from the Sun (right side) the northern hemisphere is experiencing summer (June 21) because the Sun is over the Tropic of Cancer.

How can that be? Winter when closer to the Sun? It is because at that time the Earth is tilted away from the Sun (Tropic of Capricorn) which also explains why the southern hemisphere is experiencing summer and is generally warmer for two reasons: (1) the Earth is tilted so that in the southern hemisphere the Sun is closer, and (2) the southern hemisphere has considerably more water area.

Image 2

Okay, back to the purpose of this piece. How long is a day? Most will answer that it is 24 hours. Well, sort of, as that is how we attempt to measure a day but remember every four years we add a day on February 29th. That means each year we lose 6 hours. The best way to think of an actual or astronomical day is to put a stake in the ground and measure the shadow from one rotation to the next – that is an astronomical day.

If the Earth is closer to the Sun (left side) then the larger arc takes the shadow a longer period to make a full rotation. Hence in the winter (December 21), it is the longest astronomical day. Hey, we always thought December 21st was the shortest day, what’s up? That terminology only applies to the day being the period of daylight. December 21 is the day with the least amount of daylight because the Sun is at its lowest point in the Earth’s tilt. But it is the longest astronomical day.

Greg Morris

Gilead Sciences’ (GILD) new HIV prevention shot, lenacapavir, hit it out of the park in a late-stage trial, showing 100% effectiveness. 2,000 women participated in the trial, and none of them contracted HIV, signaling a potential game-changer for HIV prevention. All Gilead has to do now is to replicate the results once more before seeking FDA approval.

If Gilead is successful, lenacapavir could be available by late 2025.

How Did the Market React?

Shares of GILD jumped 7%, bucking a deep six-month downtrend. Looking at StockCharts’ Symbol Summary, GILD also popped up on several positive scans (see the image of the StockCharts’ Predefined Scans below).

Gilead looks promising, but it’s still a waiting game. Will Gilead replicate its results? It’s possible, but nobody knows until it happens. Will the FDA give lenacapavir the green light? Again, nothing’s guaranteed.

But does the investment’s potential upside significantly dwarf the downside (as long as you mitigate your risk and manage your position size)? It’s highly likely. Gilead is on the verge of something huge. Many traders and investors won’t wait for FDA approval to jump on what might be the next big breakthrough in HIV prevention.

If you feel this opportunity is too compelling to ignore, here’s what you must watch.

The Macro Picture

First, it’s important to remember that biotech companies like GILD are often on the cutting edge of medical science, making them highly speculative investments. To appreciate how fickle and risky their stocks can be, take a look at the two boxes in GILD’s weekly chart below.

CHART 1. WEEKLY CHART OF GILEAD SCIENCES (GILD). The rapid surge in October 2022 was due to the FDA approval of two of GILD’s products. The steep fall in GILD’s stock price in 2024 was due to setbacks in the late-stage trial of a cancer treatment drug.Chart source: StockCharts.com. For educational purposes.

The surge within the blue box was driven by two of GILD’s key (FDA-approved) products—Biktarvy (a daily HIV treatment drug) and Trodelvy (a cancer treatment drug)—both of which saw substantial sales increases. Note how its SCTR score jumped above the 90 line. Within any SCTR universe, the top 10% of performers typically rank within a range of 90 to 100. The bottom 10% rank between 0 to 10, highlighting weakness in performance levels. That’s what happened next to GILD’s trend.

You can see this in the red box. At the start of 2024, Gilead’s shares fell due to setbacks in their late-stage trial of Trodelvy, which failed to show that it can improve patients’ overall survival rates when compared to other existing treatments. As you can see, the SCTR score was close to zero. And even after Thursday’s 7% surge, the SCTR, though improving, is still incredibly low at 30.

If GILD is poised to become the “next big thing,” does the 30 score indicate a bottom-floor opportunity to jump in?

Here Are the Levels to Watch

Take a look at the daily chart of GILD below.

CHART 2. DAILY CHART OF GILEAD SCIENCES. From strong downtrend to a surprise upside reversal. Is it time to buy?Chart source: StockCharts.com. For educational purposes.

A few points to note about the daily chart are as follows:

GILD exploded above its 50-day simple moving average (SMA) on high momentum. Before this, the 50-day SMA has acted somewhat as a dynamic resistance level since the beginning of the year.The Chaikin Money Flow (CMF) confirms the shift in buyer sentiment; it’s above the zero line, indicating a rapid shift from selling to buying pressure.

If you’re looking to enter a position in GILD early on, be aware of the potential support levels below $68 and $66 should prices pull back (there’s no indication that it will at the moment). The first resistance level GILD needs to surpass is above $70. This level was tested several times last year and served as an important support level this year until it was finally broken in April.

The next important level of resistance sits right below $75. Not only does this mark March’s swing high point, but the concentration of volume surrounding this congestion range (see the Volume-By-Price indicator) warns that it might prove a significant zone of contention between the bulls and bears. If price clears that level, and if GILD’s trial results continue to look promising, then the path toward (and beyond) $79 might be smoother sailing (to which you can expect some resistance and profit-taking).

The Takeaway

Gilead Sciences (GILD) is making headlines with its new HIV prevention shot, lenacapavir, showing 100% effectiveness in a major trial. If it can replicate its results, the medication has a clear shot at FDA review. If that goes well, the medication can hit the market as early as 2025. GILD has been trending downward for most of the year, with its SCTR score rising from below 10 to a weak 30. If the upcoming trials succeed, lenacapavir could revolutionize HIV prevention and offer significant returns. However, if it fails, tracking the stock’s performance will be straightforward. In short, this could be a chance to get in early on a potential game-changer.

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.

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