Sector Analysis 22 April 2012
/by Steve Auger
We are coming up to the end of the month stretch that usually but not always shows bullish behavior. It the market does show strength it will probably be the stock market's last stand before the market starts to deteriorate in May.
iShares DJ US Telecom
ETF Symbol: IYZ
DJ US Telecom is at the lower edge of an ascending channel. You could also say that a descending triangle has formed. Williams%R is showing a bearish trend. On-Balance Volume is exhibiting a bearish divergence from the price. All of this put together appears to indicate a bear market for IYZ. On the flip side, the price is still above the 200 day simple moving average, and the price could also bounce off the lower trend line of the ascending channel. Conservative traders should stay on the sidelines until the lower trend line AND the 200 day moving average are both broken on the down side. Then short this ETF (or go long an inverse version).
iShares DJ US Technology
ETF Symbol: IYW
DJ US Technology is trading within a descending channel. The price closed at a support level last week. The Williams%R is signaling a bearish trend. The On-Balance Volume previously displayed bearish divergence. I expect there will be a short term bullish move given the price is sitting at a support level. However the trend is still down. Close any short position(s) if the price penetrates the upper trend line of the descending channel.
iShares DJ Transportation Average
ETF Symbol: IYT
DJ Transportation Average appears to be going down if one believes the two indicators, Williams%R and OBV. The price chart is also exhibiting some cyclic behavior that suggests some downward action. Short positions should be closed if the price rises above the recent high of $95.05.
iShares DJ US Basic Materials
ETF Symbol: IYM
DJ US Basic Materials is trading within a descending channel. The On-Balance Volume is showing bullish divergence and Williams%R is also bullish. The Basic Materials sector will benefit from falling oil prices and IYM. Right now I don't have enough conviction to give this ETF a green light until the ETF pulls out of the descending channel which would be a very bullish sign. Aggressive traders could go long (now) with this IYM provided other sectors are held short.
iShares DJ US Consumer Goods
ETF Symbol: IYK
DJ US Consumer Goods is trading in a symmetrical triangle which is neutral. The On-Balance Volume is exhibiting bearish divergence and Williams%R appears to be bullish short term. I suggest staying on the sidelines until the price breaks out of the symmetrical triangle. Buy stops could be put above and below the two trend lines.
iShares DJ US Industrial
ETF Symbol: IYJ
DJ US Industrial is trading between support and resistance levels (see chart). Look for a potential breakout - go long on a buy stop above $71. This is supported by both the Williams%R and OBV. On the other hand, if the price drops below the support level shown on the chart then a head-and-shoulders pattern has formed and is very bearish. The price is well above the 200 day simple moving average.
iShares DJ US Healthcare
ETF Symbol: IYH
DJ US Healthcare appears to be going long but will soon hit resistance. Best to stay on the sidelines until the resistance is penetrated.
iShares DJ US Financial
ETF Symbol: IYF
DJ US Financial is still bearish according to Williams%R and OBV. Aggressive traders could go short now with a protective stop at $58. Otherwise enter a short position on a stop below the support line shown on the chart.
iShares DJ US Energy
ETF Symbol: IYE
DJ US Energy is still trading in a descending channel. Williams%R is showing a bearish trend and OBV is also bearish. If not already short then go short now. Add to the position if the price breeches the support level.
iShares DJ US Consumer Services
ETF Symbol: IYC
DJ US Consumer Services is neutral at present. Stay on the sidelines until either the resistance or support level is penetrated.
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iShares DJ US Utilities
ETF Symbol: IDU
DJ US Utilities is approaching a descending trend line. Where the price goes from there is a toss up. Williams%R and OBV are both bullish for now but if the trend line is penetrated then resistance will be met shortly thereafter. I'm inclined to ignore the indicators and short this ETF when it reaches the trend line with a protective stop at $87.
Disclosure: The author "Walks the walk" in addition to "Talking the Talk".
