Sector Analysis 19Feb12

Sector Analysis Summary

Transportation and Basic Materials remain in the dog house.  I'm tossing Industrials into the same category.  Health Care and Consumer Goods are given a yellow light status.  The remaining sectors have been given the green light for this week. 

iShares DJ US Telecom

ETF Symbol: IYZ

Last week I said "If there is significant penetration of the 200-day SMA with strong volume then it would be a good time to jump on board in spite of the cycles analysis."   DJ US Telecom broke through the 200 day moving average on Monday but was fairly lack-luster until Thursday when the ETF took off.  It is now trading near the top of the bullish channel and will probably cool off for a few days but should continue upwards longer term.  I'm giving this ETF a green light as it broke through a resistance level of $22 from late September.  A protective stop should be placed below the support level shown on the chart.

iShares DJ US Technology

ETF Symbol: IYW

DJ US Technology continues to impress.  The ETF is still trading in a tight bullish channel.  It remains a green light.  The support level has been raised to $72.  A protective stop should be placed below this level.

iShares DJ Transportation Average

ETF Symbol: IYT

DJ Transportation Average broke down the week before last and did not impress this last week.  Looking at the Williams%R indicator, it appears that the indicator could return below -80.  If it does so then the ETF will be in a downward trend.  This ETF continues to be given a red light.

iShares DJ US Basic Materials

ETF Symbol: IYM

Similar to IYT, DJ US Basic Materials broke down the week before last and did not impress this last week.    The price bounced off a long term support level but long term direction is unpredictable.  The ETF could very well retreat down to the support level or even penetrate it.  It is unlikely that the price will rise to the previous trend line so this ETF keeps its red light status.

iShares DJ US Consumer Goods

ETF Symbol: IYK

DJ US Consumer Goods did well last week in spite of the "yellow light".  The ETF is due for a small pullback as it is at the top trend line of the wedge but the price shouldn't breach the support level identified on the chart.  This ETF continues to have a yellow light status due to the likelihood of a pullback and the On-Balance Volume which appears to be forming bearish divergence. 

iShares DJ US Industrial

ETF Symbol: IYJ

DJ US Industrial has been stopped in its tracks for two weeks, unable to penetrate $70.60 level.  Curiously it also hasn't dropped below $69.50 either.  In any case there is an ominous bearish divergence with the On-Balance Volume (OBV) developing and it is time to take profits on this ETF.  The status is now a red light.  BUT if the price pushes through the $70.60 level convincingly AND the OBV recovers then the ETF will become a buy again.  It is still (kind of) trading within the bullish channel.

 iShares DJ US Healthcare

ETF Symbol: IYH

DJ US Healthcare is still in no man's land. Wait for a new pattern to form before entering a position.

iShares DJ US Financial

ETF Symbol: IYF

DJ US Financial is still trading above the channel center line.  This ETF remains a green light.  I don't see any major warning signals at present.

iShares DJ US Energy

ETF Symbol: IYE

DJ US Energy retraced but is still trading within an ascending wedge.  The price is at a cycle high but won't drop far.  So long as the ETF stays above the lower trend line of the wedge the ETF should be held long.

 iShares DJ US Consumer Services

ETF Symbol: IYC

DJ US Consumer Services is traveling a tight channel upward.  Note that the support level has been moved up so the protective stop should also be moved up.  All systems are go with this ETF.  The green light status is retained.
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iShares DJ US Utilities

ETF Symbol: IDU

DJ US Utilities is now given a green light.  This is based on the trend line that is emerging (see chart) and the OBV bullish divergence.  The chart is admittedly still a little sloppy but observe the resistance level on the chart.  Actually a support level right now as it just broke through this level late last week.  I'm expecting the price to improve from here.

Disclosure:  The author "Walks the walk" in addition to "Talking the Talk".

Sector Analysis 12Feb12

Sector Analysis Summary

With the price action from last week, some of the sectors such as technology and industrials remain very bullish, while others such as transportation and basic materials are dropping by the wayside.  We should be in for another exciting week!

iShares DJ US Telecom

ETF Symbol: IYZ

DJ US Telecom is straddling the 200 day simple moving average.  Cycles analysis predicts that the price will drop back to the support level at $21.70 Thursday or Friday next week.   Longer term IYZ will remain bullish, following the bullish trendline upward.  If there is significant penetration of the 200-day SMA with strong volume then it would be a good time to jump on board in spite of the cycles analysis.

iShares DJ US Technology

ETF Symbol: IYW

 

DJ US Technology is still going strong.  If already holding a long position then hold on with a stop below the channel lower trend line.  Otherwise wait for a pullback to near the lower channel trendline before entering long.

iShares DJ Transportation Average

ETF Symbol: IYT

DJ Transportation Average broke below the lower channel trend line.  The price will likely drop to the support level.  Traders should wait for a new pattern to develop before initiating a trade.

iShares DJ US Basic Materials

ETF Symbol: IYM

DJ US Basic Materials broke below the bullish trend line.  The price will likely drop to the support level.  Traders should wait for a new pattern to develop before initiating a trade.

iShares DJ US Consumer Goods

ETF Symbol: IYK

DJ US Consumer Goods is trading within a bullish wedge and currently at a support level.  This ETF should be approached with caution as the On-Balance Volume appears to be forming bearish divergence. 

iShares DJ US Industrial

ETF Symbol: IYJ

DJ US Industrial is at the middle channel trend line and also a support level.  For this reason this ETF still has a green light.  Note that bearish divergence with the On-Balance Volume indicator suggests that the bull run may be over soon.  Use a very tight protective stop below the current support level.

 iShares DJ US Healthcare

ETF Symbol: IYH

DJ US Healthcare is still in no man's land. The ETF price will likely fall to the red line shown on the chart. Wait for a new pattern to form before entering a position.

 

iShares DJ US Financial

ETF Symbol: IYF

DJ US Financial dropped on Friday as the cycle analysis predicted.  The ETF is still trading above the channel center line.  I would wait another day before getting back into this ETF as cycles are often off by a day. The price may get closer to the channel center line.

iShares DJ US Energy

ETF Symbol: IYE

DJ US Energy retraced but is still above the trend line and support level.  So long as the ETF stays within the ascending wedge it should be held long.

 iShares DJ US Consumer Services

ETF Symbol: IYC

DJ US Consumer Services is traveling a tight channel upward.  It is time to go long with a protective stop below the support level.  Keep an eye on the OBV as it may be starting tosignal a bearish divergence.  This is longer term however.
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iShares DJ US Utilities

ETF Symbol: IDU

DJ US Utilities appears to be preparing to start moving upward if the OBV bullish divergence signal is correct.  I'd stay on the sidelines until seeing the start of a bullish move however.  The ETF is trading in a bearish channel and the price may drop to the $84 support level.

Disclosure:  The author "Walks the walk" in addition to "Talking the Talk".