Sunday, March 10, 2013

Sector & Group Rotation Notes – 3/10/13



Listed below are notes from the author's weekly analysis.

The Sector Trends blog does not make forecasts and does not cheerlead with its commentary. The perspective offered is on current trends in the market, which sectors and groups are rotating, and which stocks from these groups are likely to perform best in a neutral/positive environment. Readers need to provide their own assessment of market health, employ their own risk management strategies, and trade accordingly. In a declining market nearly all equities will suffer, including those found listed here. 

All data and charts displayed here are the property of MarketSmith, and are published here with their permission.

Market Overview:
The table below shows price performance for key markets and sectors over the trailing 26 weeks, and is sorted high to low by 5 week performance. The green and red shading denotes relative performance +/- to the SP 500 for the time period in question.

Industry Group
1 Week Gain
2 Week Gain
3 Week Gain
5 Week Gain
13 Week Gain
26 Week Gain
Dow Jones Transportation Index
2.6%
3.4%
3.3%
4.9%
19.8%
21.8%
Philadelphia Semiconductor Index
2.4%
2.4%
1.6%
3.5%
14.7%
8.5%
Russell 2000
3.0%
2.9%
2.1%
3.4%
14.6%
12.5%
KBW Large Cap Bank Index
4.5%
3.8%
2.7%
3.4%
14.7%
14.9%
Philadelphia Utility Index
1.3%
2.1%
3.4%
3.0%
7.1%
2.9%
DJIA
2.2%
2.8%
3.0%
2.8%
9.4%
8.3%
SP 500
2.2%
2.4%
2.1%
2.5%
9.4%
7.9%
Nasdaq Composite
2.4%
2.6%
1.6%
2.1%
8.9%
3.4%
Cboe Technology Index
2.2%
1.3%
0.6%
1.8%
2.2%
-7.6%
Philadelphia Housing Index
4.4%
4.9%
-0.2%
1.2%
17.4%
26.4%
Russell 1000 Energy Index
1.4%
1.0%
0.6%
0.3%
8.8%
6.2%
Pboe Oil Service Index
1.3%
-0.4%
-2.9%
-2.4%
10.4%
6.8%
Philadelphia Gold/Silver Index
0.0%
-2.2%
-7.4%
-12.3%
-17.8%
-25.6%


The market logged a follow through day this past Tuesday as the Nasdaq gained 1.3% in volume 9% higher than the previous day. The follow through day occurred on day sixth day after the first rally attempt, within the preferred 4-7 day time window.

The Dow Jones Transportation Index continued its strong performance, and now leads the S&P 500 over all time periods, suggesting investors anticipate economic growth.

Economic data last week was positive, especially Tuesday's ISM report and Thursday & Friday's employment data.

Last week the blog pointed out the emerging relative strength of the software sector, that continued last week. The energy sector saw performance shift towards groups involved in energy exploration and production.

Lastly, the blog tracks numerous indexes, some of which are trademarked and copyrighted by their owners, which prohibits naming them here. However, the blog's analysis suggests indexes based on CANSLIM type stocks should begin to outperform.







Group Themes:
The tables below show commodity, technology and defensively related group's price performance over the trailing 1, 2, 3, 5, 13 and 26 week periods.

30 Commodity Oriented Groups:
1 wk
2 wk
3 wk
5 wk
13 wk
26 wk
# in the top 50 groups (out of 197)
11
6
6
4
6
9
# in the bottom 50 groups (out of 197)
6
10
14
14
9
8

28 Technology Oriented Groups:
1 wk
2 wk
3 wk
5 wk
13 wk
26 wk
# in the top 50 groups (out of 197)
13
12
9
9
8
1
# in the bottom 50 groups (out of 197)
4
8
9
10
7
12

30 Defensively Oriented Groups:
1 wk
2 wk
3 wk
5 wk
13 wk
26 wk
# in the top 50 groups (out of 197)
3
4
11
10
4
8
# in the bottom 50 groups (out of 197)
10
5
4
1
9
8

Last week's follow through day and subsequent market performance has wiped out any evidence of defensive rotation, and it appears the blog's skepticism from two weeks ago was justified.

There could be a slight bias towards technology oriented groups. On Friday stock market analyst/commentator Dan Fitzpatrick appeared on CNBC and pointed out that the equal weighted version of the Nasdaq 100 is outperforming most other indexes.

Industry Group Performance:


Energy: Last week's analysis pointed out that the Oil&Gas-Canadian Expl&Prod group (G1312) was about to break a 2 year descending trend line. That occurred last week, as seen in this weekly chart:


Enerplus (ERF) is from the group and was highlighted last week with a 13.80 pivot. ERF broke out Thursday and gained 4.5% for the week.


Exploration and production oriented energy groups were the top performers from the sector last week, here are a few potential selections.

Bill Barrett Corp. (BBG) appears to have bottomed. Currently the 50 day up/down volume ratio is weak at 0.9, but the 25 day ratio is 1.2, and the stock has a "B-" accumulation/distribution ranking. BBG gained 9.1% on Thursday and tacked on another 2.8% on Friday. BBG is currently extended beyond its upper Bollinger Band, and is about to hit some resistance around ~ 20.25; so it is not a buy here. However, look for it to base around the $20 level for a bit, and when it recaptures its 50 day MA it will probably also break the descending trend line seen on its weekly chart and would be a better buy at that time.



Carrizo Oil & Gas is another attractive producer, the blog shared this set up a few weeks back on StockTwits with a 22.75 buy point. It's extended above its upper Bollinger band, and also bumping up against a descending trend line on the weekly chart so it could very well pull back a little here. You can watch Cramer interview the CEO here. CRZO could be attractive after a 2-3 day pullback.


Encana (ECA) has an interesting chart:





Linn Energy (LINE) is seeing some heavy accumulation with a 50 day up/down volume ratio of 1.5, and a 25 day ratio of 1.7, the accumulation/distribution rank is a solid "B". LINE is a MLP currently yielding 7.5%. A break of the descending trend line could provide a good entry.


Resolute Energy (REN) is under very heavy accumulation with a "B+" accumulation/distribution ranking, a 50 day up/down volume ratio of 2.5, and a 25 day ratio of 2.9. REN is still within the 5% buy zone of a cup shaped base.

  

Rex Energy (REXX) is also seeing very heavy accumulation, the accumulation/distribution ranking is "B-" but the 50 day up/down volume ratio of 1.4, and a 25 day ratio of 2.1. Analysts forecast FY '13 EPS +103%, FY '14 +67%. REX has a 14.65 pivot out of a 6 month consolidation.



Southwestern (SWN) is another producer under heavy accumulation with a "B" accumulation/distribution ranking, a 50 day up/down volume ratio of 1.4, and a 25 day ratio of 1.8. SWN is 2% past its pivot out of a 20 week long flat base.


Software: As mentioned above software groups have had a good couple of weeks and appear on the rebound. Nine of ten software related groups rank in the bottom half of MarketSmith's industry group rankings, and the sole group in the top half comes in at #81. Despite the poor rankings the groups are starting to rally on the short term price performance lists, 5 groups made the top 50 of the trailing 1 week price performance list, and 6 groups appear on the trailing 3, 5 and 13 week lists.

SS&C Technologies (SSNC) is only 2% past its pivot out of an 8 month consolidation. EPS 98, RS 77, SMR "A", accumulation/distribution "A-".


Workday (WDAY) was featured in last week's blog and gained 8.5% on almost 3x average volume. WDAY still looks good if you can catch it below $60.


AVG Technologies (AVG) took a bath last week after the CEO unexpectedly resigned, but after listening to the press conference the blog suspects this pull back could be short lived.


Watchlist: A few more for the watch list:

Tractor Supply (TSCO) has been basing for 5 weeks but is seeing accumulation, 50 day up/down volume ratio is 1.5, and the 25 day ratio is even higher at 1.8.


Genworth (GNW) saw heavy volume last week and is now 4% past its pivot:


Norwegian Cruise Line (NCLH) is a recent IPO with a 31.91 pivot:


Jazz Pharmaceuticals (JAZZ) is very cheap given it's growth prospects and history of EPS and sales growth, but it might be held back for a bit by last week's secondary offer.



No comments:

Post a Comment