Sector Analysis 04 March 2012

Added on by StockMarketStudent.

by Steve Auger

As a student of the equities markets, one should always track one's performance whether trading with real money or pretend money.  In addition, one should keep notes or a journal of what went right and mistakes made. 

The following is a brief summary of calls made by Sector Inspector since startup.  This is based on the Green Light / Red Light indicators.  Yellow light implies that the trade is exited.  Stats are based on long positions for both green and red lights.  Some positions are still open.

Green Light

  • Wins:    8
  • Losses:   2
  • %Profit / Trade:  +2.58%

Red Light

  • Wins:    3
  • Losses:   5
  • %Profit / Trade:  -0.07%

Given these stats, I feel that I am on the right track with my technical analysis.  The %profit / trade is low but the signal that I am providing is quite coarse  i.e. weekly green/yellow/red.  If the stats were calculated on a daily basis with stop and limit orders factored in then the profit per trade would certainly go up.  I have also noticed that the Yellow Light status tends to be bullish. This is likely due to the overall market being bullish.  But in any case it seems prudent to stay long when a yellow light occurs and depend on protective stops to get out of the trade. 

Sector Analysis Summary

Another interesting week is upon us - most ETFs are providing clear signals.  When there isn't a clear picture I am taking a bullish stand due to my recent Asset Hound publication that showed the overall U.S. equities market has a bullish posture.  The "bigger picture" should always be considered when analyzing at the lower level.

ETF Trading System

Buy ETF (green light)

iShares DJ US Telecom

ETF Symbol: IYZ

Stock chart of iShares DJ US Telecom showing technical analysis for March 4, 2012DJ US Telecom pulled back this week but remains at a support level and within the ascending channel.  And the price also appears to be at a cyclical low.  For these reasons I have kept the green light for this ETF.  But keep an eye on the On-Balance Volume as bearish divergence seems to be forming.  Place a protective stop on your long position below the lower trend line at $22.00.


Buy ETF (green light)

iShares DJ US Technology

ETF Symbol: IYW

Stock chart of iShares DJ US Technology showing technical analysis for March 4, 2012 DJ US Technology continues to impress.  The ETF is still trading in a tight bullish channel.  It remains a green light.  The support level has been raised to $72.90.  A protective stop should be placed below this level.  (No change from last week.)

 

Sell ETF (red light)

iShares DJ Transportation Average

ETF Symbol: IYT

iShares Dow Jones Transportation Average IYT stock chart showing technical analysis for March 4, 2012

The price chart for DJ Transportation Average looks "ugly" to say the least.  After breaking down from an ascending channel two weeks ago this ETF has been slowly going down.  It is currently at a support level but will likely breech this level.  If the price drops through this support then there is another support level directly below at approximately $90.50.  If the price breaks below this level then I suggest going short.  Otherwise it will bounce upwards off one of the support levels and start forming a new pattern.

Sell ETF (red light)

iShares DJ US Basic Materials

ETF Symbol: IYM

iShares DJ US Basic Materials stock chart showing technical analysis for March 4, 2012

The DJ US Basic Materials chart, like transportation, does not look good.  The ETF is sitting at a long term support level but appears to be forming a descending triangle.  If the price drops below the support level then consider shorting this ETF.  Also note the Williams %R which appears to be retracing back down to -80 without reaching -20.  This would indicate a bearish trend is underway.

 

Buy ETF (green light)

iShares DJ US Consumer Goods

ETF Symbol: IYK

iShares Dow Jones US Consumer Goods stock chart showing technical analysis for March 4, 2012

DJ US Consumer Goods doing quite well, travelling within a tight ascending channel.  I'm giving this ETF the green light.  A protective stop should be placed below the support level of $71.25.  More aggressive traders may wish to use a protective stop just below the center trend line shown on the chart.  This would be at $72.  Keep an eye on the OBV - the last couple of days show some bearishness.

 

Sell ETF (red light)

iShares DJ US Industrial

ETF Symbol: IYJ

iShares DJ US Industrial stock chart showing technical analysis for March 4, 2012

DJ US Industrial has broken down on higher than normal volume, exiting the ascending channel.  For all appearances this ETF will likely drop from here with support at $69.25, $68 and $65.  Consider shorting this ETF.

 

 

Buy ETF (green light)

iShares DJ US Healthcare

ETF Symbol: IYH

iShares DJ US Healthcare stock chart showing technical analysis for March 4, 2012

DJ US Healthcare is forming an ascending triangle.  This is bullish so look for a breakout from here.  I suggest placing a buy stop order at $75.90.  If a long position is entered then a tight protective stop should be placed below the lower trend line as a drop below this could take the ETF down a long ways.

 

 

Buy ETF (green light)

iShares DJ US Financial

ETF Symbol: IYF

iShares DJ US Financial Sector stock chart showing technical analysis for March 4, 2012

DJ US Financial is a difficult call.  The price is still within the (wider) ascending channel although it is struggling to advance upward.  There are signals that the ETF's strength may be waning - OBV divergence and a choppy Williams %R.  I'm keeping a green light simply because my Asset Hound analysis showed that equities are still bullish.  A protective stop should be placed below the lower trend line at $54.25.



Buy ETF (green light)

iShares DJ US Energy

ETF Symbol: IYE

iShares DJ Energy stock chart showing technical analysis for March 4, 2012

DJ US Energy has pulled back from last week but is within an ascending channel and above a support level.  This ETF remains green light with a stop below the support level at $4275.



Buy ETF (green light)

 iShares DJ US Consumer Services

ETF Symbol: IYC

iShares DJ US Consumer Services stock chart showing technical analysis for March 4, 2012

DJ US Consumer Services is trading along the center line of an ascending channel.  At this time I don't see any reason to change from a green light status.  A protective stop should be placed below the support level shown on the chart ($76.80).
.

Buy ETF (green light)

iShares DJ US Utilities

ETF Symbol: IDU

iShares DJ US Utilities stock chart showing technical analysis for March 4, 2012

DJ US Utilities continues to show an ascending triangle and the ETF remains a "green light".   Look for a breakout on strong volume.



Disclosure:  The author "Walks the walk" in addition to "Talking the Talk".