News Details – Smallcapnetwork
3 Industry Charts That Could Drive Incredible Trades
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February 2, 2024

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PDT

You know, although the few days before the Christmas day off are usually pretty lethargic, today's action was oddly tepid considering we've still got a couple more days to go. Looks like people are trying to stretch a three-day weekend into a full week off. We can't say we blame them. It's tough to imagine the market tacking on any more gains to the 8% advance we've seen since the election, and if the Dow Jones Industrial Average was going to break through the 20,000 mark, it would have done so by now. On the flipside, the bulls can be reasonably confident the rest of the market is going to do everything it can to avoid a pullback. Nobody wants to be out of position on the chance stocks do the unthinkable and rekindle the rally. We will have to pay the piper sometime, in the form of a pullback. That payment doesn't look like it's due until after the new year starts though. In the meantime, with the market just drifting sideways and not doing much that's trade-worthy, we'll make good use of the downtime to pinpoint exactly where there may be some action. See, not every industry is stuck in the mud right now. We'll get to the analysis in a moment. First, we've got a question from a reader we want to answer here, since there's a good chance many of you were wondering the same thing. Roger asks: "Would RTI [Radient Technologies] be more of a long swing trade idea?" Thanks for the question, Roger. The answer is, a definite "maybe." Actually, we'd lean far more towards Radient Technologies (RTI) being a longer-term trade/investment idea than a swing trade -- even a long-term swing trade -- but with the caveat that no trade should ever be pigeonholed. You want to remain flexible when the unforeseen happens. Good reasons to sell an investment before you intended to is when it makes a great deal of progress in a short period of time and is clearly due for a big pullback, or when you're clearly fighting an uphill battle and need to play defense. The irony? RTI has arguably already become one of those unexpectedly-too-hot trades to pretend like it's not tempting to lock in the profits you've already reaped on it... about 30% from Tuesday's open. You can always buy it back again in the future, if you want. But to answer the question now as well as we can (based on what we know and what we can see), Radient Technologies is something you'd probably want to view as a long-term holding, using it to ride the swell of the cannabis-legalization wave. As we noted in Tuesday's newsletter, Radient is one of the few companies that is thinking of intelligent ways to mass produce a cannabinoid product. Most other players are trying to scale-up a marijuana business model that was never meant to be scaled up. There are almost certainly going to be trade-worthy swings within this long-term timeframe though, so when it comes right down to it, you still have to decide for yourself how you want to play the idea. If you missed yesterday morning's introductory look at RTI, here it is. In any case, since the next several days could be slow -- and since we have time to do it today -- let's look at some industry charts that look primed to move. Before we get to the new possibilities though, let's tie up the loose ends from the last time we went through this exercise back on October 4th. That's when we pegged aluminum stocks and bank stocks as two areas well worth owning. And they have been. The Dow Jones Aluminum Index is up 14.7% since then, and the Dow Jones Bank Index has gained a whopping 31% since then. For comparison, the S&P 500 has advanced 5.4% for the same timeframe. That's the power of picking the right industry/sector at the right time. We brought both picks up to let you know we're still bullish on the aluminum industry's stocks, but we think the bank stock rally has run its course. We're officially ending that unofficial bullish call today. We ran across a couple other curious industry charts in the meantime we think could supply a decent trade here.... when there's not much else going on. First, we like casinos at this time. Though the Dow Jones Casino Index is down a fair amount since peaking a month ago, this is a group that has handsomely rewarded the folks that have bought on short-term dips. It's been in a strong, long-term uptrend for a while, and we can see once the again the 100-day moving average line (gray) has stopped the bleeding and is sparking a rebound. Second, we like marine transportation stock at this time; you may also find them categorized as maritime shipping. Regardless of how you group them, these stocks are working hard to shrug off a major headwind. The current rally effort from the Dow Jones Marine Transportation Index is the second such effort this year, and this one started from a higher low. The tide is turning, even if it's choppy. This is one of those situations where even the smallest of nudges could spark a bullish chain reaction. Finally, we're actually viewing wine and liquor stocks in a bearish light - the Dow Jones Distiller and Vintner Index has started a decided breakdown, giving back some heroic gains reaped in 2015 and 2016 This week's stumble pretty much wipes away any chance of a recovery, and there's no logical support level anywhere in sight. Do what you want with these ideas. Some of them could be played with ETFs. Others might merit an stock-specific trade. Do you like these industry-specific trading ideas? Yeah, well, as much as we did with them today and back on October 4th, what we just did doesn't hold a candle to what the Under the Radar Movers newsletter does with industry picks. Back on September 7th, the URM service picked railroads, casinos, home construction, oil exploration and production the same way we did above. Those calls are, respectively, up 11%, up 4%, down 6%, and up 10% since that look. I'll take three out of four in this business any day of the week, especially when two of those four are up by double-digits in just three months. And that was just that day's calls. We didn't have time to explore the rest of the URM's industry-suggestions. It's just one of the ways the Under the Radar Movers newsletter brings big-time value to its subscribers; you should see its individual stock picks! If you'd like to benefit from these picks and observations all the time, the URM service is the best gift you could ever give yourself. Everybody have a great evening. Talk to you Thursday afternoon.