Charting the Strongest and Weakest Sectors XLF and XLE

12/12/2014 7:00 am EST

Focus: ETFS

Corey Rosenbloom

Founder and President, Afraid to Trade

Technician Corey Rosenbloom, of AfraidToTrade.com, offers a long-term price comparison, highlights the strongest and the weakest sectors as of late, the key levels to watch, and the stocks to avoid as buy candidates due to their underperformance.

A longer-term comparison reveals the current strongest sectors and weakest sector for trade and position planning.

Let’s see these weekly charts and highlight key levels to watch for additional opportunities:

chart
Click to Enlarge

Depending on how you measure relative strength, you’ll find that the Financial (XLF), Technology (XLK), Staples (XLP), and Health Care (XLV) sectors all show steady uptrends with price impulsing to new highs.

While the chart above highlights the XLF Financials, the chart below showcases Health Care XLV:

chart
Click to Enlarge

If you are looking to put money to work in an environment where the uptrend continues, focus on leading stocks within these sectors.

We refer to the concept of “What is strong tends to get stronger” as the charts above highlight.

The other concept is that “What is weak tends to get weaker” as we see from the final chart below of Energy (XLE):

chart
Click to Enlarge

XLE’s price peaked just above $100 per share mid-June 2014 while all other sectors went on to make new highs in the next few months (including these fresh breakout highs shown above).

The relative weakness continued as XLE dropped 25% lower toward the current new lows as we end 2014.

The collapse in oil prices is dragging down energy stocks in the market, not all stocks are enjoying all-time record highs like the S&P 500 and Dow Jones indexes.

Energy stocks—just to name a few— are pockets of relative weakness in an otherwise strong market.  Avoid these as buy candidates due to their underperformance.

Continue monitoring sector money flow (price performance) and adjust accordingly as leadership rotates.

By Corey Rosenbloom, CMT, Trader and Blogger, AfraidToTrade.com

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