Focus on stocks in these 7 strong sectors this week
Thanks!
Thanks for your continued well wishes regarding Hurricane Katrina. I’m still
in the process of digging (sometimes literally!) myself, friends, and family
out. Again, we are all fine and my personal property is generally okay.
Life is slowly returning back to normal. 5 refugees (oh, excuse me,
"citizens") and a dog left our "camp" (a nice one I might
add!) early yesterday. So, it’s a
little quieter and easier for me to stay focused.
Profiting From Katrina?
As mentioned recently, Katrina devastated an area the size of Great Britain
(in case you don’t have an atlas, that’s more than just England). The
question now becomes where are the opportunities left by this horrible tragedy?
Well, I’m not Economist and I don’t play one on T.V. I also don’t use
fundamentals. I just look at charts. With that said, here’s my sector analysis
so you can draw your own conclusions (well, I did include a few cents here and
there):
The Brewers have been extremely strong. I and everyone I know have been consuming
slightly more than the recommended daily allowance of beer lately.
Metals & Mining (less Aluminum), especially Steel & Iron have been
strong. Rebuilding? Other potential rebuilding areas include Materials &
Construction, especially General Contractors, Heavy Construction, Cement, and
Manufactured Housing. Selected areas of Manufacturing including Farm &
Construction Machinery have also been strong. Tobacco has been extremely
strong. Heck, I’ve even considered taking up smoking. Utilities have been
strong. Telecom, especially Wireless and Equipment, remains in an uptrend. I know
if I have to communicate one more message between my wife, sister-in-law and
their friends, I’m
going to scream. Energy remains very strong. I guess this is a no-brainer.
Retail, with the exception of Grocery Stores, remains in a downtrend. This
is especially true for Apparel. Although, I’m not sure why this is–every
time my wife returns to our refugee camp she’s got on a new pair of shoes.
On Friday, the Nasdaq chopped sideways in
early trading, rallied late in the morning, then then generally chopped sideways
again throughout the afternoon.
The S&P rallied throughout much of the day but
then also traded sideways going into the close. The difference here was that it outperformed the Nasdaq by a factor of two.
This action has it closing in on its old highs.
So what do we do? Well, so far, the
market continues to climb the wall of worry. The sector action, especially those
mentioned above, also remains constructive. Of course, there’s no guarantee that
those aforementioned strong sectors will continue to trend, but for now, that
seems like where the action is. On the short side, watch for opportunities in
retail but make sure you wait for entries based on the overall strength in the
market.
As far as potential setups, Sterling
Constuction
(
STV |
Quote |
Chart |
News |
PowerRating), in the aforementioned strong Heavy Construction
sub-sector, looks poised so continue higher out of a pattern I call
"Accelerating Momentum Strategy". Email me if you need the
rules.
Thanks for your continued donations to the Red
Cross and other relief organizations! Keep ’em coming!
Best of luck with your trading on
Monday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.