The stock market still remains in an uptrend, despite last week's pullback. The SPDR S&P 500 (ARCA:SPY) is near a projected support level, although if it continues to fall below $168.25 we could be in for another week biased to the downside. When swing trading, take long positions over short trades in the current environment, as there has been no indication from price that this uptrend is over yet. The following sector ETFs were the top performers last week, showing relative strength, and are the sectors to keep on an eye on this week. Within each sector are also a couple stocks to watch.
Consumer Discretionary Select Sector SPDR (ARCA:XLY) has been a strong sector over the last few months, so that it also showed leadership on this latest market pullback is a bullish sign. If it moves back above $61, we could be testing the high and edging slightly beyond it this week. On the other hand, if it falls below $60 the next support is $59.50 which could be seen this week as well. The $59.50 region is also buy area, providing a set-up for the next overall target of $62.75 to $63.
Within the consumer discretionary sector, Deckers Outdoor (NASDAQ:DECK) has been very strong, but based on recent movements wait for a pullback toward $63 or $62 before going long. Day traders and swing traders alike may want to keep an eye on Nike (NYSE:NKE). It gapped higher on September 27, movement outside that day's range will likely set-up short-term opportunities in either direction.
Technology Select Sector SPDR (ARCA:XLK) is near a support band at $32.10 to $31.85. If the price continues higher from the September 27 $32.24 close consider that support held and that the next wave higher is beginning. If the price continues to drop then buying in the support zone is a low risk opportunity since it is unlikely the price will drop below $31.50--and if it does the uptrend is jeopardy. Over the next several weeks look for an upside target of $33.10 to $33.20 on the next wave higher--this week is likely to provide the entry into that trade.
Within the sector keep an eye on Shenandoah Telecommunications (NASDAQ:SHEN). It's been surging higher through much of September. Short-term traders may find some trades at these levels, where as swing traders and investors may want to wait for a pullback toward the 50-day moving average currently near $19.40.
Energy Select Sector SPDR (ARCA:XLE) is also just above support. Projected support is at $82.80, followed by $82.13. If the price start off the week moving higher, I like the long. If we start the off on a down note, picking it up at the next support level is still likely to be a good trade, since it is unlikely the price will drop below $81.10 (the next strong support level). Either entry sets up the potential upside target of $86.45 to $86.75; a target which is likely several weeks away.
In the energy space a couple stocks to watch are in the Renewables industry. Jinksolar Holdings (NYSE:JKS) is in a rhythmic uptrend, so a pullback toward $19 to $18 with target just beyond the recent high (yet to be determined) looks good. Trina Solar (NYSE:TSL) is also seeing a strong push to the upside; again waiting for the pullback is likely the most prudent strategy.
Industrials Select Sector SPDR (ARCA:XLI) has a similar set up to the other sector ETFs. Most likely support is near $46, followed by $45.45 if the former level is breached by more than several cents. Ideally I like the longs at these levels, with a stop below $44.75. If we start off the week higher and keep heading up, the next target is $48.90 (a few weeks away). If we see a deeper pullback to the support levels mentioned, the target is $48.50.
In Industrials, Sturm Ruger (NYSE:RGR) has been in an aggressive upside run. While it may see a deeper pullback, a strong piercing candle on September 27 indicates the run may not be over just yet.
While the Utilities Select Sector SPDR (ARCA:XLU) should have made the list based on last weeks performance, but it is in a downtrend and doesn't have the compelling long (or even short) trades the other sectors offer.
The Bottom Line
Overall these sectors and the S&P 500 remain in an uptrend. Until evidence appears to the contrary, look for longs. These sectors were the strongest over the last week. With futures down in early trading Sunday night (September 29) we are likely to see deeper pullbacks toward support to start the week, which means a little patience may be needed in picking up long trades.