Chart Advisor: Stocks Take a Breather


Visit: Investopedia

By J.C. Parets & All Star Charts

Tuesday, 24th January, 2023

1/ Travel Stocks Take a Cruise

2/ Will ETH Follow?

3/ Energy Stocks Have Plenty of Power

4/ Social Media Stocks Get the Clicks

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1/ Travel Stocks Take a Cruise

Travel services stocks have been among the industry groups that have experienced some of the strongest rebounds since last year’s lows.

This group is considered an excellent barometer for the consumer economy in the U.S., as they represent an industry that typically does well during a strong economy and bull market.

The Defiance Hotel, Airline, and Cruise ETF (CRUZ) does a solid job of illustrating the recent strength in this area.

Source: All Star Charts, with data provided by Optuma

The ETF tracks the total return of hotel, airline, and cruise stocks, with some of its largest holdings being Marriott International (MAR), Delta Air Lines (DAL), and Carnival Corporation (CCL).

As you can see in the chart, price is currently reversing to the upside from a rounding bottom formation. In addition, market momentum as measured by the 14-period RSI recently reached its highest level ever, adding conviction to the breakout.

As long as these equities keep setting new highs, it could send a clear indication that the market and economy are doing well.

2/ Will ETH Follow?

Crypto investors continue to embrace risk as we see more and more coins resolving higher and printing new highs.

Bitcoin is thrusting higher from a bull flag, reaching its highest level since the summer.

Source: All Star Charts, with data provided by Optuma

Whether Ethereum will follow suit remains to be seen, as it is still stuck in a tight range below its November highs.

If and when ETH resolves higher and confirms the strength in BTC, it could indicate that a strong rally is underway for these digital coins.

3/ Energy Stocks Have Plenty of Power

The outperformance from the energy sector over the past two years has been impressive. But when you consider how resilient these stocks have been while energy-related commodities have sold off, their strength has been even more striking.

Below is an overlay chart of the Energy Sector ETF (XLE) and crude oil futures:

Source: All Star Charts, with data provided by Optuma

Energy stocks are pushing up against new all-time highs, despite a historic decline in the price of crude oil from last summer’s highs. If energy stocks can’t correct in an environment where crude oil prices are heading lower, how will these stocks perform with more stable oil prices?

We might not want to bet against the overwhelming strength of energy stocks, particularly if oil prices head higher over the coming weeks.

4/ Social Media Stocks Get the Clicks

Following a solid rebound from last year’s lows, communications stocks are now becoming increasingly attractive on a relative basis.

When we look beneath the surface for leadership within this sector, the Social Media ETF (SOCL) stands out as it reclaims a shelf of former lows relative to the S&P 500 (SPY).

Source: All Star Charts, with data provided by Optuma

It’s important to remember that these were some of the worst-performing stocks during last year’s sell-off. To witness these names begin to outperform could indicate that a healthy reversal is underway. The sector is developing strength in both absolute and relative terms.

Originally posted 24th January 2023

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