Financials and biotech have left the station. Many traders missed an opportunity to join the breakout in biotechnology, pharmaceutical and health care stocks, The post election blitz seems to be exhausting potential catalysts. Now we look to sectors that I’ve seen selling in recent days for potential trades.
The S&P 500 Select Sector SPDR Technology ETF is one example. XLK witnessed some selling in the FANG group, as Facebook, Amazon, Netflix, Google moved lower.
It is our initial view that much of the selling was due to fund managers lack of cash. These same managers needed to take positions in the infrastructure and healthcare industry groups. Without sufficient cash, they resorted to selling their winners, which happen to be technology.
Despite the selling in these heavy weights, there are quite a few stocks that have been trending higher. Many stocks have broken out to fresh 52 week highs. Below is a partial list of potential candidates.
Hewlett Packard doesn’t look bearish to me, as company trades into earnings on 11/22/2016 after market close. The report will be for the fiscal Quarter ending Oct 2016. According to Zacks Investment Research, based on 8 analysts’ forecasts, the consensus EPS forecast for the quarter is $0.36. The reported EPS for the same quarter last year was $0.93. (Data source Nasdaq)
Seagate reported a 12% beat on 10/19/2016 and doesn’t report again until early January. RSI suggests targets of 39.33 and then a potential handle and breakout. William O’Neil wouldn’t classify this as a cup and handle though, as the duration is too short. That said higher prices look imminent.Volume suggests institutions have been accumulating shares. Note the yield (6.62%).
STX is number two in this group, with Carbonite ranked number; rating by Investors Business Daily.
XLNX is trading post earnings (10/19/2016). Here again, RSI, SOTEMA and MACD suggest higher prices are in order. Watch for volume to increase, which will confirm institutions are accumulating positions. IPHI is number one in this group.
NTAP made quite an impression in this recent bullish reversal. NetApp, Inc. is expected* to report earnings on 11/16/2016 after market close, so we’ll probably wait till after earnings are out and forward guidance gives us a better picture of NTAP’s mortality over the next 3 months.
These are just a few names to consider, as sectors still have hidden gems, if you know where to look. Remember, Ron’s sector heat map was designed for this specific purpose. It’s changing color, signifying sector rotation into a more bullish outlook as more players buoy market indices.
Finally, it’s easy to get distracted and lose focus, when the news talks about all these well known names with such adamant distain. That said, look where the FANG stocks came from. They have appreciated immensely since the February bottom. Additionally, less we forget, there is more to this market than technology.
IWM, INDU and SPX look constructive. The longer SPY flags at the current levels, the more likely it will break higher. Prices are above the 9/20ema.
Happy Trading – CV
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