Gregg Greenberg interviewed Steve Raineri, portfolio manager for the Franklin Small Cap Value Fund (FRVLX) in our offices this week. Raineri highlighted four small-cap names that he anticipated would do well in 2017 -- AAR (AIR) , Sensient Technologies (SXT) , LTC Properties (LTC) and Landec (LNDC) . Because I favor the charts over fundamentals, I am going see what might be just around the corner on the charts in 2017 for these four names.
In the four-year weekly chart above of aviation services provider AIR, we see that prices are well above the rising 40-week moving average line. The weekly on-balance volume has been rising strongly since late 2015. Notice how the OBV line has made a new high ahead of prices breaking out to new highs? The OBV line can be a leading indicator as well as a coincident indicator. In the bottom panel is the trend-following moving average convergence/divergence oscillator, which has been in a bullish mode since July. AIR looks like it will break out to new high ground above $34 next year.
The weekly chart of color, flavor and fragrance manufacturer SXT above is clearly in an uptrend, and barring an unexpected reversal to the downside is probably moving higher in 2017. The OBV line has been slowly and surely moving up with prices and signals aggressive buying, with more volume of shares being traded on weeks when SXT has closed higher. The weekly MACD oscillator crossed downward last month for a liquidate longs sell signal. With such a strong upward trend in place the past four years, this MACD signal may only mean a sideways period of trading before renewed strength.
In the four-year weekly chart of healthcare real estate investment trust LTC above, we have a different setup. LTC has rallied over the past four years, but the short-term picture suggests that prices will need to rebase before renewed price strength potentially in 2017. LTC recently closed below the rising 40-week moving average line. The OBV line is slowly weakening and suggests that selling or liquidation has increased in recent months. In the lower panel the MACD oscillator has been in a sell mode since late August, and if it crosses the zero line it will be an outright sell signal. Looking at the price history for LTC you can see that after a steep rally prices have traded sideways for months. If this pattern repeats again, LTC may see a sideways pattern for much of 2017.
Finally, in the four-year weekly chart of health and wellness products maker LNDC above, we see a large sideways to lower trading range. Prices are above the rising 40-week moving average line, but the most recent advance stopped around $14, the bottom end of a $14 to $15 resistance zone. The weekly OBV line has improved the past three months, but not by all that much. The MACD oscillator is above the zero line, which is positive, but the lines are poised to cross soon to a new liquidate longs sell signal. Bottom line -- LNDC looks like it might be a disappointment for longs in 2017 unless we break out over $15.