As the Dow hit an historic all-time high in early trading today, MoneyShow’s Tom Aspray looks for opportunities in a heretofore lagging sector that seems to have bottomed out.
Stocks ended in positive territory by Monday’s close as the major averages were able to absorb two different waves of selling. The weak opening in the Dow tracking SPDR Dow Jones Industrial Average ETF (DIA) was followed by a brief bounce and then another test of the lows before DIA rallied for the next three hours to close near the day’s highs.
The improvement in the relative performance of the Dow Industrials over the past two weeks indicates it is ready to outperform the S&P 500. In yesterday’s The Most Oversold Dow Stocks, DIA was listed as the seventh most oversold. The daily Dow Industrials A/D line made new multi-year highs Monday, which is also a positive sign.
Many of the large-cap stocks have been lagging the market for some time and the long-term charts indicate that they are close to completing major flag or continuation patterns. The bottoming action in the technical indicators as well as their closeness to Fibonacci and long-term pivot support makes these high yielding stocks look attractive.
Chart Analysis: The weekly chart of E.I. du Pont de Nemours (DD) shows a long-term flag or triangle formation, lines a and b, that goes back to the 2011 high of $57.00.
- Two weeks ago, DD dropped to test the quarterly pivot at $46.05 (blue line) before turning higher.
- The correction held above the 38.2% Fibonacci retracement support at $45.80.
- There is next strong resistance at $50.34 to $52.33 with the weekly downtrend at $51.74.
- The completion of the flag formation has measured targets in the $63-$65 area.
- The relative performance closed last week above its WMA and shows a potential bottoming formation, lines d.
- A move through the downtrend in the RS (line c) would be positive.
- The weekly OBV surged through year-long resistance, line e, in early 2013 and retested the breakout level last week.
- OXY traded as high as $88.52 in early February and dropped over 8% to a low last week of $81.11.
- The correction has held above the 50% Fibonacci retracement support at $80.58.
- The quarterly pivot is at $79.11 with the 61.8% support at $78.63.
- Once above the February highs, the weekly downtrend, line f, is at $93.
- The initial upside targets from the triangle formation are in the $120-$126 area.
- The weekly relative performance broke its downtrend, line h, in January but has now dropped below its WMA.
- The weekly OBV moved above its WMA in January and moved through its downtrend, line i, in February.
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