Chart Advisor: Finding Value in Mid-Cap Stocks

Articles From: Investopedia
Website: Investopedia

By J.C. Parets & All Star Charts

Wednesday, 1st February, 2023

1/ Mid Caps Make New Highs

2/ Greece Powers Higher

3/ Should Investors Fade February?

4/ Follow the Juice

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1/ Mid Caps Make New Highs

The first ETF in our list of broad stock market indexes reached new all-time highs today.

The chart below shows the SPDR S&P 400 Mid-Cap Value ETF (MDYV) breaking out of a 20-month range to hit fresh all-time highs.

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Source: All Star Charts, with data provided by Optuma

After resolving higher from a multi-year base in 2020, MDYV rallied in a near-vertical line to our first Fibonacci extension from the pandemic crash drawdown. Price paused at this logical level and has been correcting and digesting gains ever since. Following several tests of the 161.8% extension in late 2021 and early 2022, MDYV fell by over 20% into the second half of last year.

With today’s new all-time highs, bulls have repaired all the damage. We’re also seeing momentum confirming the new highs with an overbought reading on the daily RSI-14. We could see more indexes follow the same path over the coming weeks. 

2/ Greece Powers Higher

We’ve been vocal about the recent outperformance from international equities, as evidence suggests the relative trends have shifted in favor of ex-U.S. stocks.

Whether you look at developed or emerging market equities, most country indexes are making multi-month highs these days.

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Source: All Star Charts, with data provided by Optuma

The chart above shows the MSCI Greece ETF (GREK) resolving higher and completing a structural rounding bottom reversal pattern.

If this breakout sticks, the bias could be higher for Greece. This is a strong data point for the bull camp and supports the strength we are seeing from other international indexes.

3/ Should Investors Fade February?

With January behind us, we are now entering what is typically one of the weakest months of the year for the U.S. stock market.

Based on historical seasonal trends, the S&P 500 has had an average loss of 0.03% in February since 1950, making it the second-worst month overall behind September.

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Source: All Star Charts, with data provided by Optuma

However, some of the most valuable information from seasonality data comes when stocks ignore their seasonal trend.

We’re paying close attention to whether stocks can continue to trend higher during this otherwise unfavorable seasonal period. If the stock rally continues into February, it could set the stage for a very strong performance in the seasonally bullish months that follow.

4/ Follow the Juice

It’s not just about precious metals and copper these days. Orange juice futures hit fresh decade highs this morning after absorbing a significant amount of overhead supply at a critical resistance level.

The chart below shows the massive multi-year base breakout in orange juice futures:

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Source: All Star Charts, with data provided by Optuma

Notice the 14-week RSI posted a bullish divergence as price bottomed in 2019. As it began to trend higher off its lows, it printed an overbought reading above 70. Since then, OJ held within a bullish momentum regime leading up to today’s breakout.

These are all classic hallmarks of a successful bottoming process, and the path of least resistance could now be higher for orange juice futures.

Originally posted 1st February, 2023

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