After a slight up open this morning, the S&P pushed into Friday’s high before being turned away. A strong three-day bounce last week that saw bulls retake control of the 50-day moving average, but at this stage the major indices are demonstrating a need for some rest and digestion. The apex of the former wedge pattern is acting as resistance at this stage, and it could take another day or so to get a definitive break above it.
Despite the indices stalling out, we are once again seeing great sector rotation with strong moves in pockets of the market. When a market begins an oversold bounce, leading sectors are usually the first to go, and that has been the tech sector. Last week we saw great moves from tech leaders like Apple Inc. (AAPL), Baidu.com, Inc. (BIDU), Netflix, Inc. (NFLX) and priceline.com, incorporated (PCLN). After that stage, though, you can start looking down the line to other groups that held up well during the correction.
OIH Breaks Out
One such sector that acted well during market weakness was the oil service group. We watch several stocks in the group, and several are making new highs, but perhaps the best set-up came in the group’s ETF, OIH. Last week saw the OIH consolidate in a tight range with a series of doji candlesticks right at the 21-day moving average. Today, we highlighted OIH as our favorite set-up in the T3Live.com Morning Call, and we have gotten the break out of that range that we were looking for. You can take some shares off if you are actively trading this ETF, but the next level to take more off isn’t until highs around $166.
JPM Gets a Lift
Another lagging sector we are watching closely is the financials. In a group that has been as weak as the banks, we will only look to play the strongest in the group, and right now that is unquestionably JP Morgan Chase & Co. (JPM). JPM is up more than 1% this morning and has poked its head above recent pivot highs. The next stop for JPM is above $47.
*DISCLOSURE: Scott Redler is long DANG, AMZN, VLO, AIG, OIH, JPM, GLD, SPHU, LEI, NYX.
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