Sector Analysis 17 June 2012
/by Steve Auger
The stock market was strong last week in spite of the ongoing concerns in Europe. It is likely that this issue (Europe/Greece/Spain) is suffering from investor fatigue and in that case the markets should continue to be strong. The best part of a bull market is the initial stages, while the average investor is sleeping. This being said, the recent strength could be one big head-fake with the bear returning with full fury. In any case, the good sectors are starting to separate from the bad. So don't just jump on the bandwagon but be very selective.
iShares DJ US Telecom
ETF Symbol: IYZ
DJ US Telecom broke out of a descending channel last week. This is a bullish sign supported by both the Williams%R (trending) and the On Balance Volume (bullish divergence). Given the strength of the move over the last two weeks, I won't be surprised to see a pullback here, but it will be short-lived. It is a good idea to buy 50% of your stock position early this coming week and wait for a pullback to the $21.80 level to buy the remaining 50%.
iShares DJ US Technology
ETF Symbol: IYW
DJ US Technology is loosely fitting within a descending channel, on the verge of breaking out. If the general stock market is strong the coming week then IYW will follow with strength and we will see a fairly strong breakout. Aggressive traders should buy on a stop at $71.50.
iShares DJ Transportation Average
ETF Symbol: IYT
DJ Transportation Average is behaving similar to US Techology (Symbol: IYW). The ETF is at the top end of a descending channel, on the verge of a breakout. I'm not particularly confident with this ETF as last week's performance was lack-luster. Aggressive traders should sell short on a price down movement.
iShares DJ US Basic Materials
ETF Symbol: IYM
DJ US Basic Materials is approaching a resistance level. It is best to stay on the sidelines until a good buy signal appears. Aggressive traders could play the short side, selling short on a price downward movement.
iShares DJ US Consumer Goods
ETF Symbol: IYK
DJ US Consumer Goods has broken out of a descending channel but is approaching resistance. I can't see this ETF going much higher - I am expecting a downturn when the general market turns, as it eventually will. Look for the price to "hug" the descending trend line showing in the chart.
iShares DJ US Industrial
ETF Symbol: IYJ
Look for DJ US Industrial to rise to the resistance level then stall. The long term direction is hard to predict as there are no obviously tradeable patterns; so I recommend staying on the sidelines.
iShares DJ US Healthcare
ETF Symbol: IYH
DJ US Healthcare is been quite strong for the past two weeks. Continue to stay on sidelines until a tradeable pattern emerges.
iShares DJ US Financial
ETF Symbol: IYF
DJ US Financial gets the green light this week as the price has penetrated the long term resistance level. A tight stop should be placed however in the event of further turmoil in Europe in the coming week.
iShares DJ US Energy
ETF Symbol: IYE
DJ US Energy "should" continue its long-term bear market if my interpretation of Andrews Pitchfork is correct.- not one of my favorite indicators, but let's see if the price stays within the pitchfork boundaries. I expect this ETF to continue down.
iShares DJ US Consumer Services
ETF Symbol: IYC
DJ US Consumer Services is at a resistance level but given the recent price action I am predicting that this ETF will rise from here. From the price chart it can be seen that there was a double bottom followed by an up surge/pullback with a higher low. Look for the resistance level to be penetrated this week.
iShares DJ US Utilities
ETF Symbol: IDU
DJ US Utilities price is bouncing between support and resistance. Stay on the sidelines.
Disclosure: The author "Walks the walk" in addition to "Talking the Talk".
