From the desk of Tom Bruni @BruniCharting
Rotation is the lifeblood of any bull market, so what better way to use our “Chart of The Week” than highlighting the rotation into cyclical sectors that’s currently taking place.
Below is a triple pane chart of Financials, Industrials, and Energy all consolidating above critical levels of support, and this week they’re moving to the upside. As long as prices are above these levels of support, the June highs look like their next stop.
Click chart to enlarge view.
The other interesting aspect is that Financials and Industrials are at critical levels of long-term support relative to the S&P 500. So if a sustained rotation was to happen, here would be a logical level for it to begin.
And if you’re looking for a higher beta way to play this, then subsectors like Airlines in the Industrial’s space have your name written all over them.
As long as prices are above support at 15.40 in Airline ETF (JETS), then the bias is higher and 22 looks like the next stop. That’s a 25-30% move just to get back there.
And the same thing goes for Oil Services (OIH). If they’re above 111.50, the bias is higher and there’s upside potential to 175.
So what do you think? Is the squeeze on and the June highs in all of these vehicles are going to be tested in the coming weeks?
It certainly looks that way to us, but let us know what you think.
And whether these fail or not, the information that will come out of that resolution will be incredibly helpful from a broader market thesis perspective as well. So whether you’re trading these setups or are just using them to inform your view on Equities as an asset class, watch these charts.
We also just released our entire Q3 Playbook this past weekend, which I’d highly recommend you check out. I think you’ll enjoy it and pick up a few quality ideas and different perspectives.If you enjoyed this post and want access to our premium research, start your 30-day risk-free trial or sign up for our “Free Chart of the Week” to receive more free research like this.