Chartsmarter Insights

Biotech Holding On:   I have stated a couple of times that bearish candlesticks in bull markets are less effective than bullish ones calling potential bottoms and that is just what the XBI is doing here. Shrugging off two negative ones here is a good start, but I still prefer to wait for PRICE confirmation with a break above the bull flag pivot. For those that did not read the WEEK AHEAD Note the very round par number where it is swimming at the moment is important on the MONTHLY chart here, which would be a hold above the 50 MONTH SMA. Notice on the ratio chart it is starting to break ABOVE a bear flag against the IBB and we know from FALSE moves come fast ones in the opposite direction. The IBB is just above a double bottom pivot of 137.64 taken out on 2/23, and notice it has moved higher following the Bollinger Bands tightening in late January and early February. Round number theory came into play for the top holding in REGN at the very round 1000 number with rejection there on 2/28, and it did not follow through lower after the consecutive bearish engulfing candles on 1/31 and 2/2 was a good sign. Another boost may be given if the fourth largest component in GILD can break ABOVE a bear flag formation.

Communication Issues:   We all know inside the communication services sector lies plenty of technology no matter how they try and disguise it. They reside in the "internet" subsector and there have been some names within that have been struggling mightily. More than 50% of the XLC, the top 4 holdings, emanate from the space with META GOOGL and NFLX. The top component in META makes up more than 30% of the fund and it is dealing with the very round 500 number here. The stock is coming back to retest a bull flag breakout so soon is concerning. Another top holding in NFLX completed a bearish evening star Tuesday and could be coming back to retest its flag breakout too. GOOGL has been the outlier, a laggard now 14% off most recent 52-week highs, and it could be ready to find a short-term floor, which will likely be a dead cat bounce here as it trades to its 200-day SMA registering a spinning top candle (on the MONTHLY chart one can see the reversals in January and February). The chart below of the XLC shows the combination of all these things we just discussed and it is slipping BELOW a bull flag. No need to push the envelope here on weakness. Let strength emerge before you apply a more sanguine approach. 

Energy Revival:     The exploration names within the diverse energy sector are decently behaving themselves. On a YTD basis, the XOP is higher by 3% while the OIH is down by roughly the same amount. When one looks at how far they are from their 52-week highs the XOP is 9% while the OIH is almost double that. Looking at the MONTHLY timeframe the same 150 area comes into play (from the symmetrical triangle on the WEEKLY) with that level being a bull flag trigger in a pattern that began in late 2020. The daily chart of the XLE shows a double-bottom trigger setting up but this is a top-heavy fund with CVX and XOM making up 40% of the ETF (each starting to diverge), and both of those names weak trading below their 200-day SMAs. Within the more nimble XOP, some leaders have exhibited force, like an SM trading right back to a 43.46 cup base breakout pivot which it took out just last Thursday. Monday it recorded a bearish engulfing candle after a shooting star Friday. FANG also registered a bearish engulfing candle today, and this is nothing out of the ordinary after both of these screamed higher by 18% the week ending 2/16. This sector in my opinion is just taking a breather before the next potential move higher.

Groovy Consumer:   The discretionary group has been on a roll lately. And it has been broad based if you will as both the XLY and XRT have been on the ascent. The daily chart of the XRT below shows smooth overall action and remaining above the cup with high handle pivot, which can also be interpreted as a bull flag. As well as the XLY has acted, notice that the XRT, the more "equal weight" fund has outperformed the XLY over the last 6 months. On the MONTHLY chart (notice the bearish shooting star at the very round par number in November 2021), one can see why I feel there is still some runway left as this could play catch up to the overall market. The S&P 500 which is now at all-time highs has left the XRT in the dust. Of course, one could say that there is a reason why it has underperformed, and that is a valid point, but as long as this can remain above the daily cup with high handle pivot remain constructive. TSLA which we have spoken about before seems to be finding its footing, and it is by far the second-largest holding in the XLY, and it will have some headwinds here as it looks to fill the upside gap, which would also be the top of the range in a bearish rising wedge. It is a good start that trade is tightening up at the very round 200 number and a move above the 50-day SMA near 210 as PRICE catches up and this could fly.