Sector rotation opportunity

September 4, 20174 Comments

Seasonals are a good backdrop for discovering sectors that may be in favor. The seasonal patterns give you a great starting point – but you also have to look at the technical profile and fundamentals before deciding to act on a seasonal pattern.  For this reason, I’ve always endorsed purchasing Brook Thackray’s seasonal guides every couple of years. Each chapter of his book represents a specific month, and the trades you need to be examining from a seasonal perspective as you come into the month. From there, I think that Don Vialoux’s daily blog is superb for breaking down the technical profiles on seasonally strong stocks. I recommend reading his blog regularly. Finally, Jon Vialoux’s website is a regular stomping ground for my own analysis when I look at individual stocks. You can type in the ticker for most large and mid-capped stocks and get an instant graph of that stocks seasonal patterns. Personally, I use all three of these resources to help me search for my ideas. Today, I’d like to cover two seasonally attractive sectors that might represent a trading opportunity over the coming months.

 

Right now, we are into the favorable season for gold (July to October).  Canadian banks would enter into their seasonal period from October to the end of the year. If you were to trade off of seasonal patterns without regard for other factors, that would probably be a good rotation to consider.  That is – buy gold now, then rotate into Canadian banks in October.

So far, the patterns are setting up for that possibility. Above is the gold chart. Nice triangle breakout!  Its back above its 200 day MA (red line). Although it’s pretty overbought on the daily chart (RSI, stochastics, MACD) – its bigger factors such as moneyflow and trend are respectably positive. I’d say that there is room for a pullback in the near-term, but the probability is for gold to hit $1360 before October. If it blows through that level, we could see the recent resistance point of $1380 tested, or beyond. That remains to be seen.

 

Meanwhile, the Canadian banks (BMO ETF ZEB chart below) are consolidating. The sector broke an uptrend early this year and began to decline. After a couple of failed attempts to break the current downtrend, the sector is not a buy yet. As you can see on the chart, most of the key indicators are declining. This includes the longer termed health indicator of cumulative moneyflow ( Accumulation/Distribution line, bottom pane). Having said that, you can see that the decline in this sector is tapering. It may be setting up for a nice breakout into its seasonal period in October.

 

Lots of stuff happening this week. I’m on BNN on Wednesday, and then at the MoneyShow for two presentations on Saturday.

I do hope you can make it out for one or both of the MoneyShow presentations. My first talk will cover the Bear-o-meter factors, and the second talk will address a very straight forward trading strategy that you can apply to either stocks or ETF’s. I tend to bring some of my books to the show and sell them at a steep discount, so if you haven’t read them, that might be a good opportunity to pick a copy up on the cheap! Every year I look forward to personally meeting my regular readers and BNN watchers. It’s always nice to put a face to the name for those who comment on this blog—so please stop by if you can!

 

Keith on BNN’s MarketCall Tonight show, Wednesday September 6, 2017 at 5:30pm

Keith will be on BNN’s popular call-in show “MarketCall” Wednesday September 6th for the 5:30 pm show. Phone in with your questions on technical analysis for Keith during the show. CALL TOLL-FREE 1-855-326-6266. Or email your questions ahead of time (specify they are for Keith) to [email protected]

Keith at the MoneyShow Saturday, Sep 9, 2017 for 2 presentations

Click here for details.

10:45 am: How to Profit from Fear and Greed

2:45pm: Technically trading ETF’s

4 Comments

  • Hi Keith,

    Per Equity Clock today “Shifting to the currency market, the Canadian Dollar, relative to its US counterpart, continues to push above resistance at 0.80 following the recently released report on GDP for the second quarter. The breakout suggests a move towards 0.92, or 15% above the breakout level. The Canadian Dollar will be in focus when the Bank of Canada releases their monetary policy statement on Wednesday at 10:00am. Seasonally, the Canadian dollar tends to strengthen through the middle of September.”

    When you blogged earlier on the CAD, you posited 0.80 and maybe 0.83.

    What are your thoughts today?

    Reply
  • HI Keith , great show on BNN .
    I am looking for some short trade into energy sector, l see some rotation happening in last few days. What do you think?

    Reply
    • We hold one energy stock, but may end up selling it as the rally moves –seasonal patterns is for short termed upside on energy into mid-late September.

      Reply

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