Two Top Sector ETFs

01/14/2011 10:16 am EST

Focus: ETFS

Thomas Aspray

, Professional Trader & Analyst

Click to Enlarge

Chart Analysis: Which of the major sectors have performed best in the past week, and are the stocks in your portfolio part of these sectors? These are good questions for both investors and traders. One way I analyze the market sectors, in addition to my usual relative performance, or RS analysis, is to monitor the Spyder Sector ETF performance from the Friday close through the following Thursday’s close.

The table at the bottom left has results for the past week (click to enlarge).

Select Sector SPDR - Energy (XLE) had the best week, up 2.36% versus 0.96% for the S&P.

  • XLE chart is positive, approaching next target at $71

  • 2008 resistance for XLE at $78; XLE support at $67.50

  • Wide gap between XLE and its moving averages (MAs)

Select Sector SPDR - Industrial (XLI) was up 2.08% during this period.
  • Chart of XLI shows strong uptrend, resistance from 2008 at $36-$38

  • XLI has first support at $34.60-$35 and then at $33.50

  • Volume is declining on both XLI and XLE

What It Means: If you are bullish on the stock market, then you will be better off concentrating on stocks or options in sectors that are outperforming a broad market like the S&P 500. Both energy and industrials have been leading the market for some time, and there are no signs of a change. Volume patterns are not great, however.

How to Profit: I previously recommended a long position in XLE at $65.80 and later raised the stop to $66.77 and advised taking profits on half the position at $69.76. This level was hit on Jan. 12. Hold the remaining 50% position with a stop at $66.77. I’m not recommending new positions in XLI at this time.

Tom Aspray, professional trader and analyst, serves as senior editor for The views expressed here are his own.

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