3 Reasons to Not Fade This Rally

Yes, a 5 day up move may be a little premature to call a rally but we are traders right? There seems to be a lot of sentiment leaning towards fading it as we hit the potential 6th day, like the 6 day swoon recently. I guess a lot of that comes from the leaders being Utilities, Healthcare and Consumer Staples. Ok, I get that. Defensive stocks are leading so take caution. But dig a little deeper. The Energy, Financial and Consumer Discretionary Sectors are all about to break out. Take a look.

Energy Select Sector SPDR, $XLE

The Energy Select Sector SPDR, $XLE, is at resistance from May and early July, a triple top, at the 100 and 200 day Simple Moving Average (SMA). It has a rising Relative Strength Index (RSI) and Moving Average Convergence Divergence indicator (MACD) to support more upside and the Bollinger bands are expanding. Watch for a move over 68.80.

Financials Select Sector SPDR, $XLF

The Financials Select Sector SPDR, $XLF,is also at a critical level at 14.85, from a series of higher lows. It has just the 100 day SMA between it and freedom to the upside, while it is riding the 20 day SMA higher. 15.50 is the next stop if it can clear resistance at 14.85.

Consumer Discretionary Select Sector SPDR, $XLY

The Consumer Discretionary Select Sector SPDR, $XLY, is approaching the top of a symmetrical triangle and is in the ‘action zone’ about 2/3 of the way through where breakout moves have the most power. A move over the top rail triggers a target of 47.10, or a new all time high.

These potential breakouts could all fail, so I am not predicting a prolonged bull run higher…….yet. But they should certainly keep you from going all in short at this point.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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