Beat It On Down the Line
A technical review of the stock market's weakest industries.
When it comes to heavily beaten down assets, the million dollar question is, “When will the bleeding stop?” Truth is, there isn’t a person alive equipped to answer that question. There is no crystal ball. But if we rely on history, we see that asset prices behave as a leading indicator. If we’re compiling evidence for or against a trend change, we’ll want to assign a healthy amount of weight to the asset’s price chart. At the end of the day, it’s price that pays you. Now, let’s review our first industry.
Clean Energy
Clean energy 3-year total return = -74%
The industry is trading -48% below its 52-week high.
Clean energy is trading beneath its COVID low but above a notable support level between $17-$19 /share. This support level represents the 2012 low - it was retested as support in 2015, 2016 and 2017. This is a well defined level to help manage risk and avoid extended drawdowns.
The monthly Moving Average Convergence Divergence (MACD) histogram is nearing the zero-line. Historically, moves above the zero-line are indicative of higher forward price returns. Price needs to work through several levels of supply before investors can declare a change of trend - nonetheless an interesting chart.
Marijuana
Prime Alternative Harvest Index, 3-year total return = -77%
The industry is trading -34% below its 52-week high.
The marijuana industry index is witnessing very early signs of a trend change. Trend indicators such as the MACD are displaying a bullish divergence. However, prices are yet to confirm indicator optimism. Investors will want to see prices form new highs before declaring a true change of trend.
IPOs
IPO index 3-year total return = -59%
The industry is trading -10% below its 52-week high.
Several successful retests of the 2022 low ~$12-$13 /share. Well defined level to manage risk. Monthly PMO indicator is turning up and in bullish position. Benefited from recent broadening out - around 50% of the index held in midcap size companies. Like so many other indices, price is yet to confirm the enthusiasm found when evaluating trend indicators such as PMO, MACD etc.
*Fibonacci heuristic is displayed on this price chart. Learn more about Fibonacci tools here.
China Technology
China technology 3-year total return = -54%
The industry is trading -22% below its 52-week high formed last September.
China equities have struggled over the last few years. But when evaluating China Technology (priced in USD) there’s a few take-aways.
Price remains below long-term moving averages.
Long-term moving averages remain downward sloping.
Trading near decade lows - but at support (2011 high, 2015 low, 2022 low).
Monthly MACD histogram is positive - indicative of strong forward price returns.
US Telecommunications
US Telecommunications industry 3-year total return = -27%
The industry is trading only -1.5% below its 52-week high.
Price will need to work through overhead supply between $25 and $36 /share. Long-term trend indicators are perking up though e.g. monthly PMO indicator completed a bullish cross - previous bullish crosses are circled.
Video Games
Video game industry 3-year total return = -28%
The industry is trading only -3% below its 52-week high.
Nearing new 52-week highs, but the price chart is yet to breakout. Resistance zone is well defined. 200-day moving average is upward sloping. Weekly PMO is above the zero-line, indicative of strong forward price returns.
We’ll see if price confirms the trend indicator readings. For now, price remains below a well-defined resistance level.
Online Retail
Online Retail industry 3-year total return = -52%
The industry is trading only -5% below its 52-week high.
Benefitted from broadening out of participation. Majority of index is held in small/midcap size companies. Trend indicators are firing on all cylinders. Price is above an upward sloping 200-day average.
That’s enough out of me!
SM
Awesome write up🍀