Hello everyone. Well, if there was any doubt as to the validity of Monday's foray into record high territory for stocks, it should have been wiped away by today's deeper push into new highs. Of course, that would be how the market could best fool most people, wouldn't it? Get comfortable above the prior peak level, make the masses think everything is alright, and then WHAM! The boom gets lowered.
I guess that's the long way of saying we still don't entirely trust this market, unsure of how much valuation room there's left to grow into.
In any case, t he first thing we want to do today is make sure you saw the news about Sack Lunch Productions (SAKL), and then make sure you saw the way SAKL shares moved in response.
Long story made short, Sack Lunch Productions was reviewed by SECFilings.com, giving current and prospective investors a chance to get to know the company up close and personal.
There wasn't a whole lot in the SECFilings report most of you didn't already know, but it might be worth a look all the same just because there were a couple of new perspectives. More important, though, is the fact that the SAKL web of awareness was just widened. Perhaps most important of all is how Sack Lunch Productions shares followed through on a key bullish hint from yesterday, gaining 10% today (and doing so on pretty good volume).
Monday's hint was the shape of the bar.... a long tail between an open and close at or near the high for the day. This shape implies the last of the potential sellers was flushed out mid-day on Monday, and the buyers were finally able to start trickling back in in earnest. Today's follow-through on yesterday's bullish intraday reversal largely confirms the move was indeed a bullish clue.
Knowing SAKL has been something of a pendulum of late, now may be the right time to step in, before the pendulum moves out of reach in an upward direction.
Anyway, as something of a treat/diversion today we'd like to do something we used to do on a regular basis but stopped doing when James Brumley over at The Future Investor started doing it -- we didn't want to step on anyone's toes. But, with permission and a blessing from James, today we're going to take a quick look at a handful of sector/industry charts that look like healthier prospects than most other groups.
I know some of you love charts, and some of you hate 'em. I get it. Those of you who are technicians love them because they can tell you when a stock or a group is starting to break out or break down. Those of you who hate 'em do so because -- you're right -- the charts don't reflect the fundamentals and intangibles.
Thing is, both groups are right, and both groups are wrong. Charts may not reflect the fundamentals, but they do reflect the market's ever-changing opinion of a company's fundamentals. Conversely, while charts may show you a new breakout or breakdown, it takes raw fundamentals to keep a trend in motion.
In other words, a chart should be part of any stock-picking regimen, but only a part.
I make that point to be clear about one thing -- these industry charts you're about to see are only meant to point you in the right direction, and prompt you to do a little more fundamental-based digging. It just so happens that their firming technical shapes are an indication that the fundamentals are getting plausibly better.
In no certain order, here are three bullish industry charts in that "not too hot, not too cold, newly bullish" zone that says they may have more upside than other industries.
Aluminum
More often than not since late last year, the Dow Jones Aluminum Index (DJUSAL) has been trapped below resistance at 86.0. It briefly broke above that ceiling in April, but was right back under it by May. As of this week though, the index is back above 86, and this time it looks like it'll stick. In retrospect we can see this was something of an upside-down head-and-shoulders pattern, and it just went bullish.
Oil Exploration and Production
Between late 2014 and early 2016, owning oil stocks was just torture. Since February of this year though, the energy sector has fought its way back to above the 200-day moving average line, with most of these names setting up a base -- a horizontal motion -- that could ultimately serve as a technical platform. Among the most technically sound in the group are exploration and production stocks. They'll need help from oil prices, but we mostly believe oil is back in a cyclical upswing.
Heavy Construction
Not unlike the aluminum index, the Dow Jones Heavy Construction Index also looks like it's completing (if it hasn't completed yet) an upside-down head and shoulders pattern that should fling the group higher in the near future. Fun fact: While residential construction stocks have been a little hot and cold lately, most investors are overlooking the fact that nonresidential construction spending is near multi-year highs, and still growing. There was also an article last week pointing out how states are finally spending at levels they were spending at before the recession. Most state's budget's include a healthy dose of institutional and infrastructure spending, which will keep spurring this turnaround.
That's not to say there aren't more of these "sweet spot" industries out there, but it's all we have room for today. If you want more of these kinds of sector-based and industry-based tips though, The Future Investor has them on a regular basis. In fact...
We know the look at industry charts is only half the battle. You still have to ferret out the proverbial picks of the litter. If you'd like to delegate that aspect of the exercise though, I can tell you that The Future Investor newsletter currently owns an aluminum stock and a heavy construction stock for the exact same reasons we described above. It's working too. Though I can't tell you what those names are, I can tell you the aluminum pick is up a few percentage points just since late last month, while the construction stock pick is up 15% on just a little over a month. That's the power of finding the right name in the right industry at the right time.
Go ahead. Make your life easier. Become a member of The Future Investor service and let the pros walk you through the complete stock-picking process the right way.