In this article, Mish Schneider, director of trading research and education at MarketGauge.com, explores the transportation and regional banking sectors, which are currently in a bullish phase, and considers why the charts are looking optimistic.
Despite worry of a pending market correction, talks of stimulus and an infrastructure package paired with a supportive US Federal Reserve helped boost market morale last week.
Specific sectors that suffered are now looking to make a comeback and, with correct positioning, anyone can jump on the trend train.
From a charting perspective, the market is optimistic for the future.
This can be seen in the so-called economic modern family, which shows one index and five key sectors that make up the overall market.
All are in a bullish phase, meaning the price is over the 50-day moving average (DMA), and the 50-DMA is over the 200-DMA.
This week’s winners are the transportation sector [IYT] and the regional banking sector [KRE], as they are the only ones to end the week positive. These two also happen to represent the sectors that have great upside potential.
IYT stands to benefit from the continuation of vaccine rollouts across the US. Many people are tired/restless from being kept inside or in one place, myself included!
As travel becomes safer, it is only natural for money to flow back into the transportation area.
A portion of IYT’s holdings is in airline companies that have suffered major losses. Stimulus has helped cut some of those losses and now, with hope of more travel, some of those stocks look ripe.
For example, Delta Airlines [DAL] was trading $50-$60 pre-pandemic, and is now sitting at circa $46.
The Regional Banks ETF [KRE] also has room to grow, as it has only recently broken over its highs from early 2020 at around $59.
With low interest rates, people have an enormous amount of buying and borrowing power.
A couple of interesting banks that have more room to grow are M&T Bank [MTB] and Well Fargo [WFC].
Moving on to the other family members, we have granddad Russell 2000 [IWM], granny Retail [XRT], brother Biotech [IBB] and sister Semiconductors [SMH].
IWM sits under the 10-DMA at $225.37. IWM’s high is around $230 and the support sits at $217-$222.
XRT is in the same boat with IWM, right between support at $75 and resistance at $81.46.
If both continue trading sideways, some consolidation might not be so bad.
Moving on, the biotech space has drifted closer to main support at $159.82 — the 50-DMA.
Additionally, IBB has stayed in line with the major uptrend, which is important as it represents new research and the state of vaccine rollouts.
Semiconductors have gone through an interesting state as demand for supplies has increased not only from the work and home trends, but also from the increase in innovative technology including blockchain.
This article was originally published on MarketGauge. With over 100 years of combined market experience, MarketGauge's experts provide strategic information to help you achieve your investing goals.
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