Everybody Hurts: REM And Other Neglected Tickers On SA (Video).
By
Zac Mannes
Summary
-A site we post articles to offers authors a page that shows undercovered tickers.
-Elliott Wave is based on Sentiment and can be contrarian at times.
-We were curious about the wave counts for stuff that no one else wanted to look at.
While certainly not always the case, investors ignoring or apathetic to names or sectors can be a sign of looming bullishness.
In the cycle of Sentiment, Panic, Capitulation and Despondency often mark the extreme bottoms. However; Depression, Apathy and Indifference are often realized while the pattern is in the early stages of crawling out of a hole. This Depression/Apathy transition can often coincide with the first significant Elliott Wave "One-Two" structure off the actual bottom. This is one of the reasons many EW analysts might tend toward more contrarian views, looking for the signals indicating that a new trend might be about to emerge, rather than merely "following the herd". Likewise, we are very sensitive to recognizing the opposite emotions of Excitement & Exuberance as signaling the END of a long uptrend.
Elliott Wave views markets and the price patterns produced based on Sentiment as Fractal in nature. Thus inside a pattern at one degree smaller versions of similar patterns are likely playing out at smaller ones. The same emotional cycles of Sentiment are also repeated at smaller degree but at a lesser magnitude. Our hypothesis with regard to the undercovered stocks was that to reach that level of Apathy or Indifference they had likely been seeing trend-less corrective action for at least a year. Sure enough many had been chopping lower since 2017. If these fades proved to be setting up good Elliott Wave projections the moves should last at least a year or more.
Stumbling upon this list of "undercovered" stocks the natural contrarian sentiment analyst gears started to turn. So I put on my headphones, turned on some good Depressing 90s rock, and starting looking at the chart for the iShares FTSE NAREIT Mortgage REITs Index (REM).
REM, like much of the market got a strong impulsive move off the early 2016 low. However, where the market continued higher into 2018 (and now making nominal new highs again) REM faded a lot. But that fade was corrective in nature and hit a perfect 61.8% Fibonacci retrace into the December lows. It now has a strong 5-wave move up to a spot consistent with the sub-wave (1) of a larger degree Third wave based on Avi Gilburt's Fibonacci PinBallmethodology. It should fade in a wave (2) (likely taking it into late Summer) but that sets up nicely for longer term bullish potential. Since the move from early 2016 low to 2017 highs lasted more than a year, we can expect at least that for the "measured move".
The Doubleline Income Solutions Fund (DSL) is the next neglected name to catch my eye. The chart is remarkably similar to REM above, five waves up from 2016 low into a 2017 high but then a fade while the market went higher. That fade though to a 76.4% Fibonacci retrace into the December 2018 low, and now a new five waves up to a level consistent with just wave 1 of the next strong move up. A clean abc retrace for the wave 2 into support shown sets up a nice longer term swing higher likely in tandem with REM.
In addition to good looking wave structure and a potential bullish chart set up I was intrigued by the stated methodology for the next closed-end fund making our list. Liberty All Star Equity Fund (USA) is split between three value managers and two growth managers. One of those, Macquarie Investment Managers, "Seeks to capitalize on discrepancies between intrinsic value and price, buying at times of excessive pessimism and selling at times of undue optimism." Exactly what I look for, and inline with the thought process for this list. Again, a similar pattern to the two names above, 5up from 2016, but here while possible the move off the 2018 low is wave 1 of the (3) starting it could get dragged into a wider flat (orange) for the (2). As discussed the pattern into stated support will be more important than merely fading to specific price level.
The other two names are individual stocks, USA Technologies (USAT) and Marinus Pharmaceuticals (MRNS). While in the possible Fibonacci support region for a large degree 4th wave, we have some serious concerns about the pattern for the move off the high and the bounce since for USAT. MRNS has a nice bullish setup for a swing move as a "Cannabis Adjacent" stock if it can hold support in the 3.00 region.
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