Chart Advisor: Stocks Take a Breather

Investopedia

Contributor:
Investopedia
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

Investopedia is partnering with All Star Charts on this newsletter, which both sells its research to investors, and may trade or hold positions in securities mentioned herein. The contents of this newsletter are for informational and educational purposes only, however, and do not constitute investing advice.

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

Disclosure: Investopedia

Investopedia.com: The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy.  While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment or strategy. This information is intended for US residents only.

Disclosure: Interactive Brokers

Information posted on IBKR Traders’ Insight that is provided by third-parties and not by Interactive Brokers does NOT constitute a recommendation by Interactive Brokers that you should contract for the services of that third party. Third-party participants who contribute to IBKR Traders’ Insight are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Investopedia and is being posted with permission from Investopedia. The views expressed in this material are solely those of the author and/or Investopedia and IBKR is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

In accordance with EU regulation: The statements in this document shall not be considered as an objective or independent explanation of the matters. Please note that this document (a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and (b) is not subject to any prohibition on dealing ahead of the dissemination or publication of investment research.

Any trading symbols displayed are for illustrative purposes only and are not intended to portray recommendations.

Disclosure: ETFs

Any discussion or mention of an ETF is not to be construed as recommendation, promotion or solicitation. All investors should review and consider associated investment risks, charges and expenses of the investment company or fund prior to investing.  Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Digital Assets

INTERACTIVE BROKERS LLC IS A MEMBER OF NFA AND IS SUBJECT TO NFA’S REGULATORY OVERSIGHT AND EXAMINATIONS. HOWEVER, YOU SHOULD BE AWARE THAT NFA DOES NOT HAVE REGULATORY OVERSIGHT AUTHORITY OVER UNDERLYING OR SPOT VIRTUAL CURRENCY PRODUCTS OR TRANSACTIONS OR VIRTUAL CURRENCY EXCHANGES, CUSTODIANS OR MARKETS.

Trading in digital assets, including cryptocurrencies, is especially risky and is only for individuals with a high risk tolerance and the financial ability to sustain losses. For more information about the risks surrounding the trading of Digital Assets please see the “Disclosure of Risks of Trading Digital Assets“.

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.