Sectors That Could Provide Opportunities Soon

April 25, 2003
Dave Landry

On Friday, the Nasdaq lapped lower and sold off hard
throughout most of the morning. It then chopped sideways for the remainder of
the day. This action has it closing poorly.

It remains above its
recent trading range.

The S&P put in a somewhat similar performance.

The good news here is that it stopped right at the recent
breakout levels (resistance becomes support–so far).

Looking to the sectors, overall, the action is positive.
Banks, broker/dealer, homebuilders, auto parts, insurance (with the exception of
accident & health), and retail all appear to be setting up as pullbacks. On
the downside, the semis sold off especially hard. This action puts them back
into a wide-and-loose trading range. Software also sold off hard and has formed
a somewhat similar pattern.

So what do we do? Now that the market has begun to correct
in earnest, I think we can start looking to get long. Stick with the
aforementioned stronger sectors that are setting up as pullbacks. However, wait
for signs that the indices and sectors are beginning to turn –or– at the
least, wait for entries.

Looking to potential setups, Borg Warner
(
BWA |
Quote |
Chart |
News |
PowerRating), in the
strong auto parts sub-sector (a), looks poised to resume its uptrend out of a
pullback. Careful though, the Borg are nasty fellows*.Â

Lowe’s
(
LOW |
Quote |
Chart |
News |
PowerRating), in the strong retail–home improvement
stores sub-sector (a), looks poised to resume its uptrend out of a pullback.