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As part of the DP Diamonds subscription, on Fridays I give subscribers a “Sector to Watch” and an “Industry Group to Watch” for the following week. This week it was somewhat difficult because I had a few sectors that looked interesting going into next week. It came down to Industrials (XLI) and Consumer Discretionary (XLY). Both charts look constructive, but I opted to go with Industrials this week.
Sector to Watch: Industrials (XLI)
We would keep a close eye on the Industrials (XLI) sector. Today saw a fantastic breakout above the 2023 high. The indicators are lined up well and looking at “under the hood” participation suggests there is more upside to follow for the Industrials.
The only part of the chart that isn’t that positive is the Silver Cross Index which is still in decline and could continue to decline based upon the fact that we have fewer stocks holding above their 20/50-day EMAs compared to the number of Silver Crosses within the sector. Remember a Silver Cross is a 20-day EMA above the 50-day EMA; whereas a Golden Cross is a 50-day EMA above the 200-day EMA. The Silver Cross Index tells us how many stocks have a Silver Cross within the sector. The Golden Cross Index tells us how many stocks hold a Golden Cross.
Additionally, we have a positive RSI and nearing PMO Crossover BUY Signal well above the zero line. Participation is strong as far as %Stocks > 20/50/200EMAs and all of those indicators could accommodate more upside. The Golden Cross Index is angling higher and is above its signal line giving us a Bullish LT Bias. We even see relative strength beginning to rise against the SPY.
Industry Group to Watch: Building Materials ($DJUSBD)
I noticed while reviewing the Industry Groups within the Industrials sector that most are lined up to do well or are already doing well. I selected Building Materials primarily for the breakout, but the nearing PMO Crossover BUY Signal helped too. The RSI is positive and not overbought on this breakout move. Stochastics are almost back above 80 and look strong. Relative strength is also picking up for the group as a whole. A few symbols to consider from this area: BLDR, KNF and VMC.
Good Luck & Good Trading,
Erin
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Erin Swenlin is a co-founder of the DecisionPoint.com website along with her father, Carl Swenlin. She launched the DecisionPoint daily blog in 2009 alongside Carl and now serves as a consulting technical analyst and blog contributor at StockCharts.com. Erin is an active Member of the CMT Association. She holds a Master’s degree in Information Resource Management from the Air Force Institute of Technology as well as a Bachelor’s degree in Mathematics from the University of Southern California.
