From the desk of Tom Bruni @BruniCharting
Sector rotation in this market continues and the Agribusiness and Chemical Industries within the Materials Sector look to be heating up. While their performance on a relative basis is lackluster, on an absolute basis there are several setups offering reward/risk scenarios skewed in our favor.
First let’s take a structural look at the Agribusiness ETF $MOO, which contains exposure to Chemical stocks as there is no ETF dedicated to that industry. Prices got back to their ’08 highs earlier in the year and have been consolidating since. A breakout above 66 would signal the beginning of a new long-term uptrend that targets 94.25.
Click on chart to enlarge view.
From a tactical perspective prices are back toward the top of an ascending triangle continuation pattern. If prices can break above 64.70 we’ll likely see a move up toward the 161.8% extension of the ’15-’16 decline near 68.75.
While this ETF looks good on an absolute basis, it’s important to note that it recently broke down from a multi-year consolidation pattern to new all-time lows relative to the S&P 500. While this failed breakdown provided some short-term relief, there’s little evidence this structural decline is over.
It’s also worth nothing that while the sector’s relative strength vs the broader market isn’t great, we recognize our readers have different portfolio approaches and mandates, so it’s important to point out all potential opportunities in the market even if they’re not among the best of the best on a relative basis (like Technology or Medical Devices).
One stock we’ve discussed in the past with Premium Members is Zoetis, which continues to work. If prices are above 84.20 we want to be long and taking profits near 112.90.