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Honeywell Leads the Industrials SPDR. Is GE Next?

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It has been a rough year for most of the stock market with seven of the nine sector SPDRs down year-to-date. The Consumer Staples SPDR (XLP) is up .69% and the Utilities SPDR (XLU) is up a whopping 6.75%. Among the seven negative sectors, the Industrials SPDR (XLI) is holding up the best because it is down the least. Thus, XLI is showing a little bit of relative strength in 2016. I will look at the chart for XLI and the three top stocks after the jump.  


General Electric (GE), 3M (MMM) and Honeywell (HON) account for around 22% of the ETF. GE weighs in at 11.61%, MMM weighs 5.65% and HON accounts for 4.99%. XLI remains in a long-term downtrend with a 52-week low in mid-January, but the ETF is in a short-term uptrend with the recent breakout near 50. Even though potential resistance is coming into play soon, the short-term uptrend is intact as long as 49.6 holds. Within XLI, MMM and HON are the clear leaders over the last five weeks. MMM is up over 15% since mid-January and HON hit a new high this week. 

My eyes are on GE because the stock is by far the biggest component. On the price chart, notice that GE hit 52-week highs throughout November and December, and then pulled back in January-February. This pullback formed a falling wedge that retraced 50% of the prior advance and returned to broken resistance. Both the retracement amount, the wedge and the return to broken resistance are typical for corrections within uptrends. Note that I am ignoring the 25-Aug spike low because it looks like an outlier. In any case, GE broke the wedge trend line and is making a run at resistance from the early February high. A breakout here would be bullish for GE and positive for XLI. 

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Thanks for tuning in and have a good weekend!
--Arthur Hill CMT

Plan your Trade and Trade your Plan
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Arthur Hill
About the author: , CMT, is a Senior Technical Analyst at StockCharts.com. He has written articles for numerous financial publications including Barrons and Stocks & Commodities magazine. Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed technician. In addition to his CMT designation, Arthur holds an MBA from the Cass Business School at City University in London. Learn More
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