Looking to the Exchanges to Cash In

• Posted by Greg Harmon
• on May 24th, 2011

When nothing looks good from an outright perspective sometimes the best thing to do is sit on your hands. I wrote over the weekend that the leading sectors seemed ready to pullback and that if that happened the Financials could become the leader on the downside (link Below). Within the Financials there were signs of change Monday with the XLF printing a potential reversal candle. Confusion, confusion. But there are also times when relative strength within a group of stocks or a sector can still give you an edge. Here is one of those opportunities in the Financials.

Above is the ratio chart off the CBOE (ticker: $CBOE) against the Intercontinental Exchange (ticker: $ICE). This chart shows a upward trend since February continuing to hold the Relative Strength Index(RSI) in bullish territory above the mid line. The Moving Average Convergence Divergence (MACD) indicator is drifting higher now as the price range is sticking above the 50 day Simple Moving Average (SMA) and testing resistance at 0.235 for the fourth time from a tightening base. If the ratio can get over 0.235 then it has resistance at 0.245 and then 0.255 and 0.26 higher. You could play this ratio by buying 4 CBOE and shorting 1 ICE. A move to the 0.245 ratio would gain $4.84, and a move to the 0.255 ratio would gain $9.33-9.64 for each ratio purchased.

Let’s Play UNO: Sector review 5/21/11

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

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.

blog comments powered by Disqus