Sector Analysis 05Feb12
/by Steve Auger
Sector Analysis Summary
Last week (Monday morning) started out bearish as I expected and the breakout sector ETFs I identified then retreated to the lower trend lines resulting in good buy opportunities. Most of the sectors have returned to being very bullish and trading within up channels. If the trend continues then we are in for a very profitable week!
iShares DJ US Telecom
ETF Symbol: IYZ
DJ US Telecom broke out of an ascending triangle on Friday. It appears to be overbought, at the 200 day simple moving average and should retreat back to the support level at $21.70 over the next week. The Williams%R and cycles analysis support this prediction. Longer term IYZ will remain bullish, following the bullish trendline upward.
iShares DJ US Technology
ETF Symbol: IYW
DJ US Technology pullback to the channel lower trendline occurred last week and now the ETF is on fire. If already holding a long position then hold onto it, otherwise wait for a pullback to the $69.50 level before entering long.
iShares DJ Transportation Average
ETF Symbol: IYT
DJ Transportation Average is trading within a (very) bullish channel. This ETF should keep going up but place a tight protective stop below the lower trend line.
iShares DJ US Basic Materials
ETF Symbol: IYM
DJ US Basic Materials retraced back to the support level last week then took off as shown on the chart. Continue to hold the long position until the price drops below the trend line.
iShares DJ US Consumer Goods
ETF Symbol: IYK
DJ US Consumer Goods touched the lower trend line last week then shot up. This ETF should now be approached with caution as the On-Balance Volume appears to be forming bearish divergence. Also, Friday exhibited a Doji candlestick which indicates uncertainty. Last time the ETF was at this level the price dropped quickly down to the support level. I suggest to take profits here.
iShares DJ US Industrial
ETF Symbol: IYJ
DJ US Industrial touched the lower trend line last week then took off. This position should be maintained until the price drops below the middle channel trend line. Note the bearish divergence that is apparently forming with the On-Balance Volume indicator. This bull run may be over in a while.
iShares DJ US Healthcare
ETF Symbol: IYH
DJ US Healthcare is still in no man's land. The ETF price continues to float upward but I expect it will eventually stall. It will likely fall to the red line shown on the chart.
iShares DJ US Financial
ETF Symbol: IYF
DJ US Financial is flying high. Look for this ETF to pull back to the $53.90 level (cycles analysis). Then it should continue its upper trend and hopefully stay within the very tight (upper) channel. I suggest taking some profits here i.e. sell half, keep half.
iShares DJ US Energy
ETF Symbol: IYE
DJ US Energy retraced but then broke out from another ascending triangle. Continue to hold this position until the ETF drops below the trendline.
iShares DJ US Consumer Services
ETF Symbol: IYC
DJ US Consumer Services has continued its bullish trend but I'm not sure how much longer it will defy gravity. Stay on the sidelines until a reasonable pullback occurs
.
iShares DJ US Utilities
ETF Symbol: IDU
DJ US Utilities appears to be preparing to start moving upward if the OBV bullish divergence signal is correct. I'd stay on the sidelines until seeing the start of a bullish move however. The ETF is trading in a bearish channel and sitting at a resistance level. The price may drop to the $84 support level.
Disclosure: The author "Walks the walk" in addition to "Talking the Talk".
