From the desk of Tom Bruni @BruniCharting

Despite the higher highs and higher lows in the major indices, all-time highs in riskier assets such as micro and small-cap stocks, and fresh breakouts in leading sectors like Technology and Consumer Discretionary, there continues to be a subset of market participants who fight this rally.

I'm a weight of the evidence guy, so I'm happy to change my mind when the data suggests it's time to, but it hasn't and that's why we've written primarily about long setups in the strongest areas of the market like Technology, (Premium Biotech), Consumer Discretionary, Retail, Restaurants,...

Crude Oil has been in a strong uptrend since late last year and is now giving us an opportunity to get involved on the long side once again after our initial price target near 4,425 was exceeded in mid-April.

Over the last two weeks, prices have experienced a swift 13% decline that has brought them back to a confluence of support near 4,425. Given that they're are still above a rising 200-day moving average and momentum remains in a bullish range, we want to be buying this pullback. Our risk is very well-defined at last week's lows of 4,305 and our next upside objective is 20% from current levels at 5,335. We know where we're wrong and the market is likely to let us know very quickly if we are, but for now the primary trend continues to favor the bulls.

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Typically we look to trade in the direction of the underlying trend as that increases our probability of success, however, occasionally lower-probability counter-trend trades offer reward/risk scenarios that are ridiculously skewed in our favor. Today we'll be looking at some of those setups where there are bullish momentum divergences and failed breakdowns that help us to define our risk and put probability in our favor.

A good example of this type of setup is Unichem Labs. Prices have been range-bound for most of the last three years and have been declining for most of 2018. Last week they undercut the 2017 lows and quickly reversed, confirming the potential bullish momentum divergence and failed breakdown. This suggests being long if prices are above the prior lows of 236, with a target near the middle of the range at 285.

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Rotation is the big word that's got us stock market bulls excited around here. It seems every couple of weeks there's a new sector that takes the baton to lead the broader indices higher. And just when one sector looks like it might be running out of steam, another one shows up to take that baton further down the track.

How long until the track runs out of runners? We don't know, but we still see a lot of contestants lacing up their shoes. Either way, after such a great relay race, if you're concerned that the next runner has a higher than normal chance of stepping on a crack, but you'd hate to be sitting on your hands if he builds on the lead, then I've got a trade that I think allows you win in both scenarios.

It's hard for me to make a bearish case for stocks with the Consumer Discretionary sector breaking out on both an absolute and relative basis. In other words, the Consumer Discretionary sector index fund is not only coming out of a 5-month base to new all-time highs, but relative to the S&P500, Discretionaries are coming out of a 30-month base to make new all-time relative highs. This is tough to ignore.

In early May, I pointed out that the Consumer Discretionary vs Consumer Staples ratio making new all-time highs was sector rotation suggesting higher stock prices in general. Since then the S&P500 is up 5.5%, the Small-cap Russell2000 is up 7.6% and the Nasdaq100 is up 7.8%. This sort of behavior is consistent with an environment where the riskier, more speculative, much higher beta Discretionary stocks are outperforming the safer, less risky and much lower beta Staples. 

Every morning I get to wake up and do what I want to do, not what I have to do. Life doesn't always work out that way, so I promise not a day goes by that I'm not incredibly thankful for the opportunities that I have. With a tremendous amount of luck and some hard work, I get to play in the biggest game in town, in every town. Throughout my career, most of my interactions with traders and investors came from living in New York for 15 years. Over the past 18 months, however, I've been traveling throughout Asia learning from investors who come from completely different cultures and bring brand new perspectives to my process.

It's difficult for me to write about these experiences because I truly don't even know where to begin. When I write blog posts and research about technical analysis, I can just tell you what I'm thinking. That's easy and enjoyable for me. But when it comes to really digging down into what the hell I just experienced on the other side of the planet, it's not that simple.

Let me start out by saying that India was the first place I wanted to visit when I decided to invest in myself and go learn from traders who don't live in Long Island,...

I recently received an email from a reader:

Are there situations with options plays where we need to be careful of the underlying's ex-Div day falling within our option's time frame?

The short answer is: YES.

The real answer is: it depends.

It happens far too often: a game-changing company comes on the scene, has a massive run in its share price, makes a ton of people a ton of money, and becomes a media darling with constant, breathless stories about this exciting new widget maker.

But then the sideliners who sat with their hands in their pockets begin to grumble about how "the stock is overbought", "it's going to crash," "the founder is a fraud," "this company is a scam," etc. No skin in the game, just bitter about not participating. It seems in recent years, Tesla (and it's founder Elon Musk) has been the poster child for this phenomenon.

Ignore the noise, follow the price, profit.

This is the video recording of the June 2018 Conference Call for Premium Members of All Star Options

The broader market has resolved its range to the upside led by several groups, among them Consumer Discretionary, which is hitting all-time highs on an absolute basis and also relative to the Consumer Staples sector. Within that group, the Restaurant industry continues to deliver strong returns. An example is Texas Roadhouse up 20% YTD on top of an already massive ~ 1300% gain from its 2008 lows.

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To show how broad-based this rally's been, I want to highlight two stocks on the opposite ends of the spectrum, Denny's, the breakfast chain, and RCI Hospitality Holdings, the owner/operator of nightclubs.

Denny's has been in a strong uptrend since breaking out in late 2013 and broke out again earlier this year after consolidating for the majority of 2015-2017. Now that prices are retesting the breakout level, we want to be buyers of this weakness and look to take profits up toward 22.50. With that said, if prices break below 13.80 a more neutral approach is best.

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This week I had the pleasure of being interviewed by Anthony Crudele, host of the Futures Radio Show. In this episode he asked me about my process, how I first got into the market, how I approach the market place today and in what ways we help our clients who are financial advisors, hedge funds, family offices, traders and individual investors. I really enjoyed this conversation and wanted to share it on the stream.

I don't think many people are prepared for a 60% rip in shares of Tesla. I see the headlines coming through written by people who have never traded a stock in their lives. I see the pessimism and skepticism. Most importantly, I also see that a third of the float is short the stock. So forget what people are saying, look at what people are doing!

Those of you who know me or have been reading the blog for a while understand the power of the failed move, or the "whipsaw" as we like to call it. The old saying is that from failed moves, come fast moves in the opposite direction. I believe this scenario is precisely what we have on our hands today in shares of Tesla. In my opinion, the risk here is much higher and the higher probability outcome is that these shorts get squeezed very hard.

From the desk of Tom Bruni @BruniCharting

Today's mystery chart reveal post highlighted the potential opportunity in the Homebuilder ETF ($XHB) as it sits at an important inflection point within a longer-term uptrend. In the post I highlighted that although there is mixed performance among the components, the reward/risk is still skewed in favor of the bulls at current levels. As a follow-on to that, this post will be highlighting some of the best and worst stocks in the sector along with our risk management levels and targets for each.

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From the desk of Tom Bruni @BruniCharting

Last week I posted the mystery chart pictured below to see what people were thinking once they removed the biases of knowing the security name, timeframe, or etc. and had only price to rely on.

Well, the *rough* results are in and

• 50% said do nothing because of the opportunity cost;
• 25% said buy; and
• 25% said sell

The Technology sector ETF $XLK in recent months has overtaken its previous highs set in the year 2000. For anyone that was trading during that time, you know that breaking these levels is a big deal. Do you think 18 years of reclaiming former highs is going to stall right here? I don't.

But maybe you think this week's stretch break higher is a little much and while you're bullish too, perhaps you're more cautiously so in the near term? I don't entirely disagree. Thankfully we've got some well defined levels to trade against while seeking to earn some income.

I'm back in the United States and I must say, it was truly a pleasure attending this year's Traders Carnival in Mumbai. The interest in Techncial Analysis was off the charts! (see what I did there?) The people were amazing and the food was outstanding. The entire experience was really enjoyable for me and my younger sister, who tagged along with me to Mumbai this time.

Many of you have been asking about the slide deck I used during my first presentation to kick off the event. You can download the entire PDF here:

This week's chart of the week is highlighting the 4+ year highs that Copper made today, however, the rest of the base metal space should not be overlooked as it continues to show relative strength versus the rest of the commodity complex. With that being said, this post is a quick update on our risk management levels and price targets for the rest of the space.

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We've talked about why we love big bases in prior posts and Copper certainly falls into that category as it's done nothing since 2011. The reason Copper is relevant today is because it's confirming a breakout from its 7-year base by hitting 4+ year highs and clearing resistance near 470-475. From a risk management perspective our risk is very well-defined as we only want to be long above 470 and a price target of 588 means the reward/risk is ridiculously skewed in our favor.

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From the desk of Tom Bruni @BruniCharting

The news broke last night that Twitter will be replacing Monsanto in the S&P 500 on June 7th. This announcement comes at a time where Twitter is hitting 3-year highs and is trending higher with the rest of the social media stocks and tech sector. The stock is still down 49% from its all-time highs hit in 2013 and was the butt of Wall Street’s jokes not too long ago, but its recent run presents a great opportunity to study what characteristics to look for when trying to pick a bottom in a stock, the responsible way.

It’s very easy to get caught up in the day to day noise of the market, especially if you’re allowing toxic media content into your life. It’s virtually impossible for us to completely ignore it all, although I do try my best. So, at the very least, we want to be aware of what type of content we’re consuming and the conflicts of interest that are driving it. But another, and much easier way to avoid getting lost is simply by taking a step back. Monthly charts allow us to see the forest through the trees and is one of the most valuable parts of my entire process.

Even if you’re a day trader or short-term swing trader, I think it’s a huge advantage to understand the direction of the underlying trends. For me, who specifically looks out weeks and months, trying to make money this quarter, my monthly candlestick chart review is essential. I can’t begin to tell you how much this has helped me avoid blindly calling tops or bottom fishing in never ending downtrends. It most certainly helps us err in the direction of the underlying trends which, of course, increases our probabilities of success.

We'll start with the Nifty 50 which has been the strongest of the group as...

Technology stocks continue to lead the broader markets higher, and that still keeps us at All Star Charts bullish on stocks. How can you not be when technology has such an important weight on the indexes?

JC recently drew attention to the leadership in the Payments Processing space. It seems that nearly every chart of every major company in the sector looks insanely bullish. And it's hard to argue when you look at names like Visa ($V), Mastercard ($MA), Global Payments ($GPN), Paychex ($PAYX), and Square ($SQ).

But my attention is squarely focused on an opportunity in Paypal $PYPL and here's why...

When the biggest sector in the S&P500 representing 25% of the entire index makes an all-time daily, weekly and monthly closing high, it's probably worth paying attention. I also hear the lazy people talk about how Technology is being led by just a few names. This is simply not true as the Technology Equal-weight index is also breaking out to new highs. We're seeing a broad based rally in Tech, and it's not something new.

I've been pounding the table on Technology because it's been outperforming on an absolute basis, but also on a relative basis. Tech is not just going up, it's beating all the other sectors. Here is the Equally-weighted Tech Index Fund $RYT breaking out of a 4-month base to new all-time highs. New highs are a characteristic of uptrends, not downtrends:

This is not a rally being led by fewer and fewer names. This is a rally where...

Last week I had the honor of speaking at the 7th Annual Traders Carnival in Mumbai, India. Bloomberg Quint covered the event and I had the opportunity to sit down with Navneet SalujaDsouza to discuss my process and some of my thoughts on the NIFTY 50 Index. Here is the audio recording of that interview.

Remember that Bearish Island Reversal in the Nasdaq in March? I wrote a whole note about it pointing out that it was now going to be a problem. The fact that the Nasdaq broke out to new all-time highs, and then failed hard, was evidence of an overwhelming amount of supply for stocks relative to demand.

I mentioned at the time that it was most likely going to resolve through time, rather than through a severe downside correction in price. The reason was that this was just a brief 2-month breakout and not a massive top or reversal. I said that the sooner we can get through that 7000 level, the stronger the market we're in from an intermediate-term perspective. Not only was this a risk management tool, but also as a source of information: strength or weakness in this case.

Fast forward just 10 weeks later and we're now breaking out above key resistance once again.