Surrendering The Top Spot:
With the recent weakness in the industrial sector (worst performing group Tuesday by far, and second worst Monday), including a near 3% drop last week on big volume, technology has leapfrogged the group on a YTD basis. Is the space taking a well deserved breather, or is something more sinister in play? I fell like the former scenario is more likely, but remember predictions are meaningless compared to PRICE action. Give the XLI the benefit of the doubt as long as it keeps CLOSING above its 200 day SMA. That line was touched Monday and bounced, and the fact that is was difficult to get above in recent months, shows former resistance is now support. Trade accordingly.
There does not seem to be a pure play railroad ETF, which is surprising, but today we will look at a best of breed name in the arena. Below is the chart of UNP, a name just 4% off most recent all time highs, despite a recent 12 of 13 session losing streak between 2/20-3/8. The shallowness of the drop shows a failure that bears were unable to capitalize on. Now we know the best breakouts tend to work out right away, and UNP rose through a 162.10 double bottom with handle pattern on 2/11. It is not uncommon at all for breakouts to be retested for validity and that is just what happened here and it has bounced ever since last Friday. Continue on.
The airlines have been a major drag on the industrial sector. There have been some stunning moves in the space with AAL down a precipitous 46% from most recent 52 week highs. It is down 4 of the last 5 weeks, with all 4 CLOSING in the lower half of the weekly range. Below is a name that had been looking decent in our 2/22 Industrial Report. UAL was sporting a bull flag that formed in conjunction with the very round 90 number. This chart emphasizes the importance of CLOSING prices as the 90 figure was taken out intraday on both 2/25-26, but none finished above the number. Respect the process.