Sector Watch: Coal

Coal is currently one of my favorite sectors for long trades. Among coal stocks, PCX has one of my favorite patterns. Entry at the bottom of the bullish flag consolidation range is ideal.

What's Worked Over Two Different Time Frames

Below are two sector lists. The first is the best performing over the past year, while the latter lists them over the past month. The sectors that show up on both lists are the ones I am most interested in right now, since it seems to be where most feel safe parking their money during the current market.

Sectors Nearest New Highs

Here is a list of sectors ranked according to "percent of 52 week high".
























Most sectors on this list will come as no surprise. However, "regional southwest banks" threw me for a loop. I dug deeper and looked at individual stocks and did not find one that I'd put on my watchlist. Some had decent price patterns, but not enough solid volume.

I still like many of the commodity sectors that top the list, but won't get involved until there is a pullback (which some sectors, like steel, seem to be starting).

Industry Strength

Here is a list of the top performing sectors of the past week. My favorite technical pattern is Steel.

Time to Reload Shorts?

Some beaten sectors have retraced to levels that make for attractive short entries. High on my list is education services.














As for individual stocks, my watchlist includes CPLA, APOL, DV, EDU, LTRE and CECO.

The Ag Gap

I sure am glad I decided to wait for more of a bounce to short ag. Geez. All of the ag stocks are making big moves based on this headline, "Monsanto ups profit view on corn, herbicide strength," and a few other headlines.

I'm going to take a step back and just watch ag this week. The overall pattern is still toppish, but today's gap over resistance puts this theory in question.

Quick Thought: The Commodity Bounce

Many broken commodity plays, like the ag sector, have made big bounces today (as of 11:35 AM ET). Keep an eye on volume. One of two things is going to happen:

1. A low volume bounce which will be a "dead cat" signal. If this happens I will intitiate shorts in stocks like MON and TRA.

2. The sector comes storming back on strong volume. This will tell us that the recent action was merely a pullback and it's time to get long again.

Distribution patterns give the edge to the "dead cat" prognostication, but I won't enter in either direction until I get a clear signal.

Sector Review

Here are the top performing sectors last week. There isn't much that has me excited here. Most of them were bounces from some of the worst industries over the past few months, like mortgage, cement and building materials.



One sector I do like is Ag Chemicals.

Sector Review

This was not a great week for the market. We still don't know if the character of this bull market has changed or it was just a natural correction. Either way, after a negative week, it pays to make note of what is working.

During a week where every major index was significantly down, lead by the Nasdaq at -6.5 percent, only 24 of 239 Industry groups were positive. My current favorites are Internet Providers, Oil and Gas, Industrial Equipment, Dairy Products, Silver, Gold and Ag Chemicals.

Sectors that are Working in this Volatile Market

Two sectors that have withstood current volatility and selling pressure are Education Services and Aerospace/Defense. A few stocks from these sectors of particular interest are CPLA, EDU, BEAV and ATK.

CPLA Chart:



BEAV Chart:

10 Sectors to Play if You are a Bull

Here are the best performing sectors over the past week. If we get a signal to go long, these are the sectors you want to put in play.



On Thursday I put forth a short strategy that attacks momentum stocks that are extended, handled Thursday's correction poorly, and fail to mount there highs in the near future. You can bet I will avoid stocks from these 10 sectors if I apply a short strategy. Amazingly, 9 of these 10 sectors were up on Thursday. Only copper in the red, though it did rally away from the lows of the day.

5 Sectors to Watch this Week

I will be watching the following sectors closely this week:


Industrial Metals recently broke out to new highs and is now consolidating gains. I am looking for low volume weakness in the sector's strongest stocks, which include FDG, BOOM and BBL.

Sectors Posting Five Days of Gains

The following 15 sectors have posted positive gains 5 days in a row:



Sectors that have me interested include: beverages, aerospace/defense, oil & gas and ag chemcicals.

10 Sectors and Stocks to Watch

The following 10 sectors had a week that rivaled Tom Brady's week one breakout:



I went through the top 10 sectors and picked one or two stocks from each:

ABX & AEM (Gold)
DVA (Specialized Health Services)
LVS & WYNN (Resorts and Casinos)
XMSR (Broadcasting Radio)
CELG & ILMN (Biotech)
JEC & KBR (Technical Services)
CEO & DNR (Independent Oil)
KO & Hans (Beverages-Soft Drinks)

Nothing in the Silver and REIT-Healthcare facilities sectors interested me.

August Sector Review

It's a good idea to keep tabs on what's working and what's not, so at the end of every month I do a sector review. Here are the top and bottom twenty for August.

Bottom 20 Sectors:

Top 20 Sectors:

Many of the top performing sectors are coming off down moves and may actually be good short candidates. One sector that is breaking out to new highs is internet service providers:

Four Reasons to Sell Steel

The steel sector, which has been one of my favorites over the past year, has undergone a change in character that now puts it on my "short watchlist." Four elements make it an attractive short:

1. Signs of distribution, with high volume down days accompanied by low volume updays.

2. Break of the 200 day moving average, which had previously acted as a loose trendline.

3. Change in character of the stochastic indicator. During the trend, oversold levels were bought up right away, with the indicator spending little time in the bottom half of the chart. Current levels have remained oversold since late July.

4. Breakdowns in sector leaders such as MT, STLD, X and RIO.

A bounce towards the 200 day moving average may provide an opportune time to short stocks within the sector.

CTRP and Oil Stocks

There is a good chance I will take a position in CTRP tomorrow:


In yesterday's video webcast, I mentioned that I liked independent oil and gas, along with oil refiners. These five stocks made my "oil" watchlist: WNR, NFX, KWK, DNR and IOC.

Sector Analysis: Restaurants

The restaurant sector has been on fire over the past two months. On the sector chart below we can see a break out at 775 and made a 50 point rise with limited pullbacks. Finally, we have a pullback to the 20 day MA, making this an attractive entry point. Below are my eight favorite restaurant stocks, all of which are among the strongest in the sector: YUM, WEN, DAVE, BWLD, CMG, JBX, SONC and DRI. All of these stocks have made parabolic moves to the upside, so pick your entry points wisely.

Today's Trades and A Question About how I Spotted PDE

In reference to the PDE setup, Rahul asked "Indeed a good trade. Could you tell how it came on your radar."

Sure Rahul,

Two weekends ago, I performed a sector screen, as I do every weekend. Energy was one of the stronger sectors that I identified, but I felt that it was a bit extended. I went through about 300 energy charts and identified 30 pullback candidates. PDE was one of those, and once it hit my target, I entered.

Today's Trades:
Just as with PDE, two more stocks from my watchlist pulled back to good entry levels after strong breakouts.

I bought 600 shares of FCEL at $7.89. The stock has handled support, both the breakout point and the 200 day moving average, by printing a bullish engulfing candle. I expect the stock to challenge the recent high.

I bought 500 shares of HOC at $57.94. The stock has pulled back to supprt on diminishing volume. I have placed a loose stop at $55.90, under the 50 day moving average. The target is $62, which would mark a test of old highs.

Sector Spotlight: Energy - Part 1

Energy stocks having been on fire. While it's too early to tell, I suspect we may be in the midst of resuming a multi-year energy bull market. I certainly don't want to miss the boat if this is true, so I skipped my usual Saturday nap (after playing tennis or basketball) and reviewed over 300 energy charts. Here are the top 30 energy stocks that I will be watching in the near future, along with my entry point notes (pb means pullback and bo means breakout).

Oil Drillers:
PDE - pb 30
ATLS - pb 54
GSF - pb 60 or bo 63
HP - pb 29
RIG - pb 80 or bo 83
ESV - pb 52
ATW - pb 52
PKD - pb 9

Oil Refining:
SVN - pb 69-70
HOC - pb 57-58
HES - bo 56
WNR - very extended
DK - pb 17

Oil Pipelines:
KMP - pb 51
TPP - pb 42-43
PAA - pb 56

Oil Equipment:
SPN - pb 32
SII - pb pb 44-46
NOV - pb 67-72
CAM - pb 58
GMRK - pb 40
TESOF - pb 22

Major Oil:
TOT- now, trendline tag
E - now, trendline tag
XOM
CVX

Independent Oil:
COG - pb 65
DVN - pb 64

In the coming days, possibly tomorrow or Monday, I'll post some of the better looking charts.