BROADCASTING AND ENTERTAINMENT INDEX HITS NEW HIGH -- MEDIA ETF BREAKS FROM MASSIVE WEDGE -- CARNIVAL AND ROYAL CARIBBEAN LIFT PEJ TO NEW HIGH -- IS CBS COMING OUT OF A BIG CORRECTION? -- BBT GETS BACK IN SYNC WITH SPY -- FITB FORMS BIG REVERSAL PATTERN
BROADCASTING AND ENTERTAINMENT INDEX HITS NEW HIGH... Link for today's video. Chart 1 shows the DJ US Broadcasting and Entertainment Index ($DJUSBC) in the main window and the S&P 500 in the indicator window. Instead of using the price relative ($DJUSBC:$SPX ratio) to compare performance, I am just going to compare price action between the index and the S&P 500. In particular, the green arrows mark higher highs in July and early December for both. This means the index is keeping pace with the S&P 500 on the price chart. In other words, both recorded new highs around the same time and this means the $DJUSBC chart is in sync with the broader market (S&P 500). A lower high in $DJUSBC would mean the index is out of sync in a negative manner. Also note that $DJUSBC hit new 52-week highs in late November and late December. The trend here is clearly up and clearly strong.
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Chart 1
MEDIA ETF BREAKS FROM MASSIVE WEDGE... There are two ETFs that correspond to broadcasting and entertainment: the Media ETF (PBS) and the Leisure and Entertainment ETF (PEJ). Chart 2 shows PBS in the main window and SPY in the indicator window. TimeWarner Cable, Disney, Viacom, Time Warner, DirectTV and Dish Network are the biggest holdings. First, notice that PBS was out of sync with SPY from March to September. SPY was forging higher highs, but PBS was forming lower highs during this timeframe. After a big spike in mid October, PBS came roaring back to the summer highs and got back in sync with SPY in December because both exceeded their prior peaks (green arrows).
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Chart 2
On the price chart, PBS formed an inverse head-and-shoulders from July to December and broke above resistance with a surge the last few days. Technically, this inverse head-and-shoulders is a bit out of place because it is too big relative to the prior decline. Nevertheless, there is a clear resistance zone in the 25.75 and a clear breakout. Chart 3 shows PEJ with weekly bars over the last three years for a little more perspective. After a strong advance in 2012 and 2013, the ETF took a year off to rest with a consolidation or correction. The ETF broke the wedge trend line in November to signal an end to the consolidation and a resumption of the uptrend.
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Chart 3
CARNIVAL AND ROYAL CARIBBEAN LIFT PEJ TO NEW HIGH ... The Leisure and Entertainment ETF has a different, and more diverse, set of top stocks. In addition to media stocks, there are cruise lines, restaurants and hotels in the mix. Royal Caribbean, Restaurant Brands, Chipotle, Carnival, Disney, Time Warner and Hilton are the top stocks. On the price chart, PEJ is stronger than PBS because of strength in Royal Caribbean, Carnival and restaurant stocks. RCL and CCL surged over the last two months and hit 52-week highs last week. Both are quite extended and ripe for a rest or correction.
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Chart 4
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Chart 5
Chart 6 shows the Leisure and Entertainment ETF (PEJ) surging to resistance in late October, stalling for a few weeks and breaking out in late November. After a throwback to support in mid December, the ETF surged again the last two weeks and hit a 52-week high. PEJ may be short-term overbought, but the trend is up and it is back in sync with SPY, which also hit a new high in late December.
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Chart 6
IS CBS COMING OUT OF A BIG CORRECTION?... After looking through the media stocks, I came across CBS with an interesting chart as we head into 2015. Chart 7 shows CBS with a steady advance in 2012-2013 and a possible correction in 2014. This could be a big correction because the stock was entitled to a pullback after hitting multi-year highs throughout 2013 and into 2014. Also notice that CBS retraced 50-62% of the last big advance (Oct-2012 to Mar-2014). This correction may be ending because the stock formed a big piercing pattern in October and got back in sync with SPY over the last two months.
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Chart 7
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Chart 8
Chart 8 shows daily bars over the last eleven months for more detail and there are a few bullish developments. First, the stock broke support in late September and moved back above the support break in late December. Second, the stock gapped down in early December, but countered with a gap up and move above the early December high. Third, the immediate trend is up with a series of rising peaks and rising troughs since mid October. The risk is that this rise evolves into a bearish wedge. For now, the wedge is rising and I am marking support at 51.
BBT GETS BACK IN SYNC WITH SPY... John Murphy and I have written about strength in the finance sector since early December and this sector continues to perform well. It is not just large-cap financial stocks, but also small and mid cap financials. Today I would like to highlight three stocks from this sector that are on the verge of breakouts. Chart 9 shows BB&T (BBT) surging in the second half of October, consolidating with a volatile range and then breaking out in late December. Notice how the stock was out of sync with SPY from March to September. BBT forged lower lows and lower highs as SPY forged higher highs and higher lows. With the breakout and higher high in late December, BBT is back in sync with SPY and looking bullish again.
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Chart 9
FITB FORMS BIG REVERSAL PATTERN... Chart 10 shows Fifth Third Bancorp (FITB) with an inverse head-and-shoulders pattern taking shape since late July. The highs over the last five months mark neckline resistance and a breakout at 21 would confirm the pattern. The height of the pattern is 20% (low to neckline) and a breakout would target a 20% move from 21.
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Chart 10
IVZ FORMS BIG CONTINUATION PATTERN... Chart 11 shows Invesco (IVZ) with a cup-with-handle pattern forming over the last four months. Popularized by William O'Neal of IBD, the cup-with-handle is a bullish continuation pattern and a break above rim resistance would signal a continuation of the bigger uptrend. IVZ was in sync with SPY from January to September, but fell out of sync the last four months as the cup-with-handle formed. A breakout would put it back in sync with the market.
