Are Any Sectors Showing Strength?
Financials look terrible, energy has weakened, but there are always opportunities.
This service is for general informational and educational purposes only and is not intended to constitute legal, tax, accounting or investment advice. These are my opinions and observations only. I am not a financial advisor.
After a week of travel and the close to October, I thought it would be good timing for a sector review.
You can learn a lot by reviewing sector ETFs regularly.
I try to do a full review every week, but I honestly probably only get to them twice a month. Three times at best.
That said, I do believe sector ETFs are worth watching and analyzing them is something every trader should consider.
Even if you only trade SPY, for example, it would be helpful to know how the sectors within are behaving.
Is tech continuing to lead? Is energy pushing higher? What is going on with the semiconductors?
Let’s take a look at the charts and find out!
And why not start with semiconductors. NVDA is holding $400 and AMD reports this week.
The sector ETF I like for this space is SMH.
Below its 50-day simple moving average (SMA), and in a clear downtrend, semiconductors look to be losing ground.
There is a chance we see a nice pop this week off of the bottom of the channel, but I expect the 150-day SMA and 50-day SMA to provide resistance.
I think SMH has a hard time getting back above $147 but if there was a stock outside of NVDA could help it get there it would be AMD.
Earnings are reported after market close on Tuesday for AMD and I’ll be watching for the market’s reaction.
Taking a look at biotech next, and ticker XBI.
This ETF has seen better days and looks to be heading lower.
I don’t know if it is the rate environment or something entirely different. I just know the chart looks awful and is heading back to at least $61.69.
I am staying away from biotech and healthcare at the moment.
Here’s a chart of XLV, the healthcare ETF.
The top two holdings make up over 20% of the fund. They are UNH and LLY.
It is almost surprising to see the drop, but there is more room to fall with a clear target of $121.20 to the downside in sight.
We will get to some positivity, I promise.
But first, the financial sector which is tracked by ticker XLF.
I noted in September after the trendline was broken that I expected a similar drop to what we had earlier in the year.
And here we are, a 10% drop from $34 with no sign of slowing down.
Bank earnings did not impress and XLF has $30.34 as it’s downside target.
Now let’s shift focus to XLP, consumer staples.
Forming a bit of a double bottom after retesting the lows from one year ago, I like the potential bounce near $66.22.
This fund has thirty-nine holdings and you will recognize nearly every one. They are staples after all.
PG, COST, WMT, and PEP total over 45% of the ETF and if there was every a spot for these names to bounce it would be here.
Many of the names in this sector are coming out of oversold territory. Worth noting.
Last up is energy and ticker XLE.
After making higher highs and higher lows all summer, energy has been moving sideways.
Last week shares closed just above $84.44 which is a key support level.
I am looking for a bounce here and return to the 50-day SMA just below $90.
A drop below $84 will quickly find $81 and after that support shows up aroung $78.25.
And that is it for this week’s sector review!
Schedule Update
Apologies again for the light amount of content last week, life got busy!
I am back at it and dropped this “bonus” sector review to hopefully make up some for while I was traveling and not writing as much.
I’ve got a lot of great things in the mix and I am excited for the rest of 2023!
This newsletter, incorporating more audio/podcast material, and posting more on X are just a few things I’m doing.
Here's the new schedule:
Sundays: WOLF Financial Newsletter, The Trading Triangle Podcast/Newsletter
Mondays: X Spaces
Tue-Wed-Thu: A Trader’s Education Premarket Audio/Written Newsletter Posts, X Spaces
Fridays: X Spaces
Saturdays: Family time!
Thank you for reading and let me know if there is a stock you would like me to cover or any trading topics you want to learn more about.
Have a great day!
-Nate