Weekly Pending Setups Report | New Setup XLU

If you missed it, we provided an introductory video that summarizes the Trader Membership and its strategy. We also explain our strategy on potential stop losses here, and entry points in this report.

Last week’s weakness across equity and commodity markets caused WMT and Bitcoin to become active setups, while GDX was taken off as a pending setup and switched to monitoring as the divergence is no longer valid.

Keep in mind that many of our pending setups have been activated over the past few weeks, so those will all be published on in the Active Setups report posted on Thursday.

We have one new setup this week.

New Setup

• Utilities Select SPDR ETF (XLU)

Asset Classes

Equities

• Walmart Inc. (WMT): Pending → Active (turned active 8/16/2023).

Equity ETFs

• VanEck Gold Miners ETF (GDX): Pending → Monitoring Setup (Divergence has been burned through)
• Health Sector Select SPDR ETF (XLV): Pending

Commodities and Cryptocurrencies

• Natural Gas Future: Pending
• Bitcoin: Pending → Active (turned active 8/15/2023).

 

Equity ETFs

New Setup: Long Utilities Select SPDR ETF (XLU)

-Bullish divergence setup with price making lower low and RSI higher low in August compared to end of May levels. The prior divergence in March led to a 11% move for Utilities over the next month.

-A break of the short-term trendline would be a start, but a move above the longer-term trendline starting in December of 2022 would activate the trade.

-Target 1 aligns with the 200-DMA, while targets 2 and 3 are lower probability targets that are consistent with key horizontal levels.

-Macro Catalyst: Utilities have suffered with the sharp move higher in interest rates, but a renewed focus on defensive sectors if rates consolidate could help drive Utilities outperformance.

-A potential stop loss is placed right below the YTD lows.

Short: Health Sector Select SPDR ETF (XLV)

-Bearish divergence setup as price made higher high and RSI lower high in July compared to April levels.

-A break below the trendline extending from the end of May would provide the sell signal.

-XLV is nearing this trendline but the converging 50 and 200-DMA could provide some support near term.

-Targets align with key horizontal resistance levels, with target 3 needing price to sustain a continued reversal lower in order for it to be met.

-Macro Catalyst: XLV recently bounced off its 50-DMA, but a continued rotation into cyclicals (Financials, Energy, Materials) could come at the expense of Health Care if economic data were to outperform.

-Stop loss is placed at the unfilled gap from December of 2022.

Commodities

Short: Natural Gas Future

-Bearish divergence setup with price making higher high in August and RSI higher low compared to June levels.

-The setup would be triggered with the upward trendline from April, which has had multiple touches over the past few months.

-Since last week, Natural Gas prices have fallen below the 50-DMA but are now testing that important trendline.

-Targets align with key horizontal levels, with target 3 needing a sustained reversal in prices to retest the lows.

-Macro Catalyst: Natural gas prices have been impacted by strikes in Australia, threatening production levels. An end to strikes could see prices fall again, in addition to any sustained US Dollar strength or waning of economic momentum in Europe.

-Potential stop loss is placed slightly above the YTD high.