On Friday, we looked at a monthly chart of Duke Realty Corp., noting the stock has been on a bullish run since January.
Today’s Chart of the Day is a Keltner Channel chart for iShares U.S. Financials ETF (NYSE: IYF).
IYF tracks the investment results of the Dow Jones U.S. Financials Capped Index ― an index that measures the stock performance of U.S. companies in the financial industry. The fund generally invests at least 90% of its assets in securities of the underlying index and in depositary receipts representing securities of the underlying index.
Now, Keltner Channels serve as an overbought/oversold indicator. When the daily stock price is trading above the Upper Channel, it signals that the stock is overbought.
Stocks in a price uptrend do not advance in a straight line. There are always price retracements along the way. When a stock becomes overbought, it normally declines in price as the inevitable profit taking occurs.
With that in mind, take a look at the daily price chart for IYF along with three lines indicating the Keltner Channels (Upper, Middle, and Lower).
The chart shows that IYF is in a strong price uptrend and recently became overbought many times as the stock traded above the Upper Keltner Channel (circled in blue).
And as you can see, after trading above the Upper Channel in all scenarios, IYF experienced a pullback.
Now, despite experiencing pullbacks, in all cases IYF always continued to rally afterwards.
Of course, that begs the question: If you want to participate in this rally, where is the best place to enter?
We use the Keltner Channels to help us select a lower-risk entry point.
A Keltner Channel “Buy Zone” occurs when a stock is trading below the Upper Keltner Channel. Meaning, once the daily price is trading below the Upper Channel, it signals a buying opportunity.
If you had purchased IYF shares when it entered the “Buy Zone” around August 5th, you’d be up 11.35% on the stock by now.
Knowing that IYF shares are continuing to rise, experience pullbacks, and rally again, we’ll be paying attention to future pullbacks in order to get in at the lowest entry point.
Before I sign off, I’d like to talk about how a previous Chart of the Day stock has done…
Maximizing Our Profit Potential
On December 4th, we highlighted ProShares UltraPro S&P500 (NYSE: UPRO), noting that UPRO had retraced below the Upper Keltner Channel. This offered a prime buying opportunity.
If you had purchased UPRO shares on that day, you’d already be up 9.89%.
But… if you had purchased the right option contract for UPRO on that day, you would be up 55.55% in less than two week’s time!
That’s the power of options, and the entire purpose of my investment service, Chuck Hughes’ PowerTrend Options.
My PowerTrend Options service is dedicated to maximizing your profit potential using options, in turn bringing you one step closer to true financial security. Click here to learn more.
Editor, Chart Of The Day