Once again, I am looking at which sector can take leadership for the near future. It appears that as we sit and wait for the market to resume the uptrend, the market re-allocates and rotates to various sectors that may benefit from future inputs on the election, interest rates, or any number of other fundamental inputs.
So, the idea for me remains the same – allow others to speculate on what fundamentals may come out and focus my trade on the impact on the technical indicators in the charts.
To find the next trade in focus, I’ll go back and run through a couple of intriguing charts I’ve seen forming.
I can see some interesting potential setting up with tech, as you can see here from the ETF QQQ:
QQQ is setting up an ascending triangle now as it tests highs on the back of bullish behavior in some mega-cap names like Apple and Microsoft. That could certainly set up a trade for a later date, perhaps even later today, but for now, until the new high, I’m looking for something more exciting that’s already in motion.
With the recent move in bond yields, seen here with TLT, I am starting to see a potential for another move:
Bond yields are rising again after appearing ready to push for lows. This shift often has an impact on the financial sector, so I’ll look at both XLF for larger financial institutions and KRE for the impact on regional banks:
Bond yields are rising again after appearing ready to push for lows. This shift often has an impact on the financial sector, so I’ll look at both XLF for larger financial institutions and KRE for the impact on regional banks:
Seeing the magnitude of the move in KRE gets me more excited about regional banks, especially those that got hit hard by some of the earlier regional bank issues of the past year+. One such name that comes to mind is NYCB:
As you can see, NYCB is down substantially, but is also intriguingly getting some momentum here that is lagging the KRE ETF. Given this setup and the potential for leverage in a short-squeeze event, I am very interested in NYCB call options with implied volatility near 6-month lows.
There are many other financials and other sector names in my Outlier Watch List, so if you’re looking for more names like this, make sure you check it out! With the list, I show how these technical signals can be leveraged in various underlying stocks. So, make sure you check out my Outlier Watch List, where I give a long list of stocks I’m considering for bullish and bearish entries via options.
And as always, please go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@optionhotline.com
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