Last week’s distribution day put quite a dent into the current rally, and further distribution this week could force our market timing model into neutral mode (click here for details on how the timing system works).
Our weekend stock scanning produced a few ETFs that are consolidating in bullish fashion, such as Guggenheim Shipping ETF (NYSEARCA:SEA).
$SEA is currently consolidating in a tight range near its 52-week high, after a 20% rally off the 40-week moving average in late June. The ETF is also forming a bull flag type pattern on the weekly chart.
There is also nice time symmetry in the chart pattern. The rally was 12 weeks long and the consolidation is also 12 weeks (so far). Further, the consolidation has retraced only 33% of the prior advance. This is a bullish sign because a bull flag pattern should not retrace much more than 33% of the prior advance, with 38% being the max:
The price of $SEA is currently oscillating around the 10-week moving average (similar to 50-day moving average), with last week’s candle forming an “inside week.” This occurs when the current week’s price range falls within the price range of the previous week. An inside bar basically shows a tightening of the price action within the base (another bullish sign).
$SEA is not yet an “official” setup on our watchlist, but we are monitoring the ETF for potential buy entry this week.