Sector Analysis 15Jan12
/by Steve Auger
Sector Analysis Summary
Last week several sectors broke out of triangle formations including industrials and transportation given the green light in last weeks journal. This week consumer goods and consumer services look good. See below for detailed sector analysis.
iShares DJ US Telecom
ETF Symbol: IYZ
DJ US Telecom chart previously broke out from a symmetrical triangle and now appears to be forming an ascending triangle. IYZ is trading well below the 200 day simple moving average and is at one (of many near) resistance levels. It is best to sit on the sidelines and wait to see how this ETF chart develops.
iShares Dow Jones Transportation Average
ETF Symbol: IYT
DJ Transportation Average previously broke out of an ascending triangle which is bullish chart pattern. The ETF price is above the 200 day moving average and is at a resistance level with the most recent day being a doji candlestick, signaling a short term reversal. Intermediate term the price will likely "hug" the upward trend line. Since a position is already being held in this ETF a possible play would be to write (sell) April 99 Call Options.
iShares DJ US Basic Materials
ETF Symbol: IYM
DJ US Basic Materials previously broke out of a symmetrical triangle and the price chart was very bullish last week. However the ETF is at a fairly significant resistance level and is still trading below the 200 day simple moving average. My belief is that IYM is overbought and will likely drop from here.
iShares Dow Jones US Consumer Goods
ETF Symbol: IYK
DJ US Consumer Goods previously broke out of an ascending triangle and is now following a bullish trendline. The price is trading above the 200 day simple moving average and appears to be preparing for take-off.
iShares DJ US Industrial
ETF Symbol: IYJ
DJ US Industrial has previously broken out of an ascending triangle and has been very bullish the last week. The price is now sitting at a long term resistance level. This ETF appears to be overbought presently and should retreat back to the (bullish) trendline. This presents a very short term sell opportunity. Since there are no IJT options I will be selling my IYJ holdings. Otherwise I would have considered writing Call Options against my long position in IYJ.
iShares DJ US Healthcare
ETF Symbol: IYH
DJ US Healthcare has an interesting stock chart. The ETF price is currently near long term resistance but continues to hug the bullish trendline. Sit on the sidelines for now. However, the 5 year price chart (not provided) shows that IYH is partially into the third leg of an upward swing that could take the price up to $85. If the price penetrates $76 then enter a long position without hesitation.
iShares DJ US Financial
ETF Symbol: IYF
DJ US Financial has formed a symmetrical triangle. The price is at the 200 day simple moving average and a long term resistance level. IYF could break either way. Stay on the sidelines.
iShares DJ Energy
ETF Symbol: IYE
DJ US Energy has broken out of an ascending triangle but it has subsequently dropped below the triangle support level. I should also mention that this ETF is just below the 200 day simple moving average. IYE has reached the 200 day simple moving average three times previously without breaking through. IYE appears to be breaking down.
iShares DJ US Consumer Services
ETF Symbol: IYC
DJ US Consumer Services has broken out of an ascending triangle. The price is above the 200 day simple moving averageand appears to be following the bullish trendline upwards. The last trading days I like the looks of this stock chart - IYC is a good candidate for going long. However a tight protective stop should be placed below the local support level.
iShares DJ US Utilities
ETF Symbol: IDU
DJ US Utilities fell as predicted last week. The shadow of the long tail candlestick for the most recent trading day reaches down to the lower bullish trendline, marking the support level. Although the price will probably bounce from here, I don't like the erratic nature of this chart and suggest staying on the sidelines.
Disclosure: The author currently holds positions in iShares IYT Dow Jones Transportation Average and IYJ Dow Jones Industrials.
