Despite the powerful gains in the major averages last week many investors
are still on the sidelines and Moneyshow's Tom Aspray has four
strong sector stocks that are ripe for new investment as we head into
The stock market may face its first real test of the New Year this week as
the short-term overbought technical readings and general skepticism over last
week's rally makes a correction likely.
The powerful readings from the weekly NYSE A/D line that I discussed in last
the Wall of Worry indicates that the intermediate trend for the stock
market is clearly positive. Therefore, stocks have the potential to rally quite
a bit higher in the first quarter of 2013.
The market tracking ETFs like the Spyder Trust (SPY)
were higher in December as SPY gained almost 3%, but some sectors did much
better with the Select Sector SPDR Financial (XLF)
up over 8%. Many stocks in the financial sector did even better as Bank
of America (BAC)
was up well over 22%.
Concentrating on the market
leading sectors and more importantly the stocks in these sectors should
allow you to be well-positioned for a first quarter rally in stocks. These four
stocks have significant upside potential and should be bought on a pullback.
Click to Enlarge
Chart Analysis: Roper Industries Inc. (ROP)
is a $11.3 billion machinery company that is part of the industrial sector. The
stock broke through weekly resistance in the $113.25-$113.42 area last week.
- The long-term weekly uptrend, line a, was tested Monday as the low was
just above $108.
- The weekly relative
performance has shown a pattern of higher highs since it bottomed in the
latter part of 2011.
- The RS line has turned up from its rising WMA after making new highs in
- The weekly OBV broke through resistance, line c, last summer which was a
very positive sign.
- The OBV has been leading prices higher for the past few weeks.
- There is near-term support at $112.60-$113.20 with much stronger in the
- The currently quarterly
pivot is at $109.25.
Kansas City Southern (KSU)
is a $9.7 billion railroad company, which is a 7.8% holding in the
iShares Dow Jones Transportation (IYT)
also shows a major upside breakout.
- The move through resistance at line g, completes of the continuation
pattern with the next upside targets in the $95-$97 area.
- The relative performance analysis also shows a major breakout to new highs
as resistance at line e, was overcome.
- The uptrend in the RS (line f) is consistent with a long term
outperforming stock as it has gained almost 150% more that the Spyder
- The on-balance-volume moved through major resistance, line g, in December
and has turned up sharply.
- The pullback in late December was on low volume.
- There is initial support now at $85.50 with stronger in the $84 -$84.50
- KSU is trading well above the quarterly pivot at $109.25, which is
consistent with a positive
outlook for the first quarter.
NEXT PAGE: 2 More Strong Stocks