J.D. DURKIN : And a very good morning to all of you members watching at home. AAP team member Bruce Kamich joins me today to take a deep dive into the technical landscape and also help discuss a few of the charts that have been catching his attention.
But before we get to that, a quick reminder for all of you watching at home. Bruce's views may not always perfectly align with Chris's. And Bruce's take on any given chart may not really account for the fundamental thesis behind a stock's particular position inside the portfolio. With that said, it has been a busy but short trading week.
Bruce, it's great to have you here. Kick us off with what has stood out to you in really just the past few days when it comes to the overall market. It's been a busy one.
BRUCE KAMICH: The one thing that I've noticed. A company will have an earnings beat, top line, bottom line, and the stock will pop. It will gap on the opening. It'll trade up strongly. And then the next day, you're not seeing follow-through.
And that tells me the people that bought in advance of a number have views that rally to take profits. And the next quarter number, they may not be as enthusiastic about it. And so the market is always forward-looking.
So if you can't have follow-on strength after a top and bottom-line beat and a price gap, I see it as people selling into strength and not adjusting their position, buying more. To me, they're liquidating if you can't see that follow-through strength.
And that's what I've been seeing this week in a number of names. Not every name, but a number of names have not had that knock-on buying after a beat.
J.D. DURKIN : Sure. Quick follow-up on that-- any of those names you're able or willing to share?
BRUCE KAMICH: Well, one of them we're going to talk about is John Deere. It had a beat, it had a gap-up, a strength. And it was a day, day and a half, and it's fading. So the market is looking ahead to something else.
Maybe somebody's driving by the corporate offices in Illinois and then they see the parking lot in the visitor's lot, it's not full. It's just anecdotal things. They don't have to be on the board of directors and have inside information to form an attitude about how the company is doing.
J.D. DURKIN : I wonder what advice you may have for the average investor watching at home, Bruce, especially as they track the indexes that are heading for yet another week of losses?
BRUCE KAMICH: Well, I think the pain can extend into late March, early April. How much can you lose in that period of time? Difficult to forecast.
But the thing at this point is, if you haven't raised cash, I would raise cash. I would call out weak names that are not performing for you. And be prepared for a better buying opportunity.
Now is the point of time, like when you're more than a year into a decline, you should switch your hat to trying to discover what the next leadership is going to be. It should be the stocks that are going down the least in this period of time.
So if the broad market is down 20% or 30% and the sector and industries you're looking at are only down 10%, as an example, they are they're down but they're outperforming relative to everything else, and that's where you should be able to find the next leadership and the stocks you want to be buying and have on your shopping list for a couple of months out. Time to do your homework.
J.D. DURKIN : Absolutely. To the point about homework, we were talking about Deere a few moments ago. You recently took a look at that stock in a post on real money, Bruce. You ultimately found the chart to be mixed. Can you explain to us what in the chart actually led you to that particular line of thinking and what the price action is really telling you after Deere's pretty strong quarterly earnings?
BRUCE KAMICH: Yeah, so they had good earnings, they had a pop. And it didn't have the follow-through through buying, as I mentioned. If you just overlaid this chart that you have up on the screen with the 50-day moving average, a simple moving average, the average line had crested. It had started to weaken already.
So the slope is negative. So despite the backdrop of an earnings beat, the price action was weakening. Volume was not expanding on the rally.
I find that old school chart watching-- old school chart watchers would get excited if AT&T crossed the tape and it was on an increase in volume. You're not just looking at the price. You're looking at the rate of change of price and you're looking at the volume. You want to see that investor interest show up in volume.
And I was not seeing that on John Deere. And if you want to use an older indicator, I like to look on balance volume. Simple math-- if price is up on the day, you add the volume. And if the price is down on the day, you subtract volume.
And if you have prices going up on expanding volume, the line is going to rise. And for Deere, the line was flat to declining, which math tells you that we had to see bigger volume traded on down days, even if it's only down a penny. So that was not working.
And a trend-following indicator, the moving average convergence/divergence oscillator, was below zero. So it was lacking in trend strength. So all that put together gave me the clues, for me, that it was not performing. And path of least resistance is probably lower in this market.
J.D. DURKIN : Yeah, and a great job from our team here at AAP to pull up those charts. It's outstanding perspective as we're having the conversation.
Bruce, outside of Deere, I wonder, is there another stock in the portfolio catching your attention from a technical perspective? And I have a sneaking suspicion you specifically had your eye on some names in the health care sector. What do you think?
BRUCE KAMICH: Yeah. So in the past week or two I looked at UnitedHealthcare, not just because I have insurance for them, but also Elevance Health and Centene, the symbol CNC. And I've got a bearish view on CNC and a bearish view on UnitedHealth. And the health care sector has been a outperforming sector in the past year or so.
And when you see a sector start to lose its upside momentum and start the weekend, that was formerly a leader. Energy and health care were leaders-- have been leaders. And I'm seeing the weakness in Centene and UnitedHealthcare. So it got me to look over on AMN Healthcare, which broke its December lows. And I looked at Elevance Health, which is showing a large equilateral triangle. And it's broken out on the down side.
So the observation that two of the leaders in health care, a big E like UnitedHealthcare, if it's starting to look weak in the charts, I want to look at the rest of the names in the sector and see which ones you want to call out or reduce your exposure to.
J.D. DURKIN : It's great context. Health care currently down as a sector, about 6/10 or so, but certainly not as bad as some of its colleagues, if you will, in the overall 11 sectors. Finally here, before I let you go, with the recent rise in crude oil, Bruce, any thoughts on the club's position in XLE?
BRUCE KAMICH: OK. My issue with it is I do believe that energy prices are going to go higher on a longer term basis. We're not producing more. Demand is probably going to come back at some point. So it's not if it's going to go higher. It's a when.
However, if you look on this chart of the XLE, all the rallies over 90-- some of them got up towards 94-- all the rallies over 90 have failed. And we can probably, if we dig down to a name like Occidental Petroleum, which has been an outperformer within this ETF, its rallies have started to top out. So when you're not seeing the price action line up with the story, there's got to be another story.
So maybe the softness in energy prices are going to go on longer than we assume. There's always somebody out there or many people out there that are closer to the news, better informed. And their little footprints show up in the price action. And the price action on the XLE is starting to weaken. So that an outperforming sector, XLE, another outperforming sector, health care-- XLV I believe is the symbol for that ETF-- when the leadership is losing ground, that's another sign that the broad market is going to have further troubles.
J.D. DURKIN : Of course. All right, great. Bruce Kamich, thanks a lot for taking the time to join us. Nice to see you again, Bruce.
BRUCE KAMICH: OK. Have a great day. Have a great weekend, everyone.
J.D. DURKIN : Have a great day. Have a great weekend to you as well. Members Chris Versace and I will be back on Monday to get ready for another very busy week of earnings. Have a great weekend and we will see you then.