Sectors to avoid

I’ve covered a few stocks and sectors that look to be emerging from “dog-hood” in the past couple of weeks. Here and here are the blogs.  The stocks and sectors covered in those blogs were presented as potentially emerging opportunities.

Today, I’d like to look at a few sectors that are perhaps best avoided, at least until they show signs of technical improvement. I won’t do a write-up on the sectors—instead, I think my trendlines will deliver the message loud and clear. Note that my first chart- that of US utilities, is not officially bearish. I merely note that it is challenging a wall of resistance formed in 2014 – after a period of strong performance. That may be a consideration for those contemplating on new positions in the sector. The Canadian utilities face a similar situation.  Here we go with my list of “best to avoid” sectors:

 

Utilities ($UTY)

UTY

Paper Products ($DJUSPP)

DJUSPP

Hardware ($HWI)

HWI

Brokers ($XBD)

XBD

Biotech ($BTK)

BTK

Retail (XRT)

xrt

Keith on BNN today: Monday May 30, 1:00pm

BNN studio2

I’m doing the afternoon show today- Monday May 30th from 1:00PM – 2:00PM. Call in with questions during the show’s live taping between 1:00 and 2:00 pm. The toll free number for questions is 1 855 326 6266.

6 Comments

  • Hi Keith,
    What do you think about preferred shares in general at this time. Looking at ZPR on the Toronto exchange, it’s testing it’s 1 1/2 year downtrend line. Is it getting ready to break out or fall back down again? I’m wondering if it falls into your “sectors to avoid” or “fallen angels” blogs.

    Looking forward to your BNN show.

    Reply
    • pref’s could be on your watch list but not showing a break of the down trendline, no higher low, or higher high –the downtrend is still evident despite recent rally

      Reply
  • Keith, could you please explain if the paper index ($DJUSPP) is somewhat the same as the lumber futures? If it is, I would stay away from WFT, which is a ticker I’ve been watching. Thank you!

    Reply
    • Matt
      WFT-T is in the process of bouncing off of a strong support level (near $39). The paper index shows a recent higher low and arguably a recent higher high – showing early signs of turnaround. I wouldn’t classify them as being in the same market phase –WFT looks to be a bounce-trade while paper in the US looks to be a turnaround.

      Reply
  • HI Keith – the biotech sector seems to be breaking out and seasonally I believe it rises from now until late June to mid-July. Are you thinking to avoid this sector as it’ll drop later this summer or are you thinking it’s already at a top now and already on it’s way down so too perilous to buy/hold now? I wonder if it’s possible for it to break that trendline?

    Thanks much!

    Reply
    • Good observation Fred and thanks for bringing it to everyone’s attention.
      Since I wrote the blog, it does appear that Biotech is indeed trying to bust that downtrend!
      And yes–seasonally its in favor from the end of June through the fall. So–it may very well be moving from an “avoid” sector to a “buy” sector! Give it a bit to see if a breakout holds, and then it could be a nice opportunity.

      Reply

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