DecisionPoint

Materials Sector Picks Up Momentum

 | 

Today, both the Materials SPDR (XLB) and the equal-weight Materials ETF (RTM) posted new Price Momentum Oscillator (PMO) BUY signals. With talk of a trade war, many investors believe that the Materials sector could provide a decent hedge. I don't know if that is true, but I do know that the charts of these two Materials ETFs are looking promising.



Looking at the daily chart, you can see that the PMO BUY signal was triggered as it crossed above its signal line. I'm not too happy with the very thin margin between the PMO and its signal line as that could set up a whipsaw. I am encouraged by the close above both the 20/50-EMAs which could set up an IT Trend Model BUY signal should the 20-EMA cross above the 50-EMA. This has been a volatile sector to be sure, but the volatility has created a bullish ascending triangle. While not "textbook" in my opinion due to the white space between horizontal resistance and April, May and July tops, I do still believe the pattern is viable.

You can see a similar set-up on the equal-weight version, RTM.

I took a look at the weekly chart below and was pleasantly surprised to see a long-term bullish flag formation. The intermediate-term PMO is still in decline, but it does appear to be decelerating somewhat. The ascending wedge is very visible on the weekly chart so I do believe it is a formation to watch.

Conclusion: The Materials sector could be turning around and be ready to make a run. I would apply caution if you get in now since we don't have a rising weekly PMO, nor a breakout above overhead resistance. It could be a short-term play, but I think the weekly chart shows that this might be a better intermediate-term trade.


Technical Analysis is a windsock, not a crystal ball.

Happy Charting!
- Erin


Helpful DecisionPoint Links:

Erin's PMO Scan

DecisionPoint Shared ChartList and DecisionPoint Chart Gallery

Trend Models

Price Momentum Oscillator (PMO)

On Balance Volume

Swenlin Trading Oscillators (STO-B and STO-V)

ITBM and ITVM

SCTR Ranking


**Don't miss DecisionPoint Commentary! Add your email below to be notified of new updates"**


 

Enjoy this article? Hear more from Erin Swenlin at

August 10th & 11th, 2018


See how the experts are protecting themselves from market volatility and reducing risk in uncharted waters

Join us online this August for two full days of investing insights, charting wisdom and market commentary from the industry's leading technicians. Streaming live wherever you are, you'll learn exactly how the experts are navigating the market's changing tides and remaining profitable in all conditions.

Erin Swenlin
About the author: helped create and manage the DecisionPoint.com website alongside her father, Carl Swenlin. Together, Erin and Carl launched the DecisionPoint daily blog in 2009. She hosts the MarketWatchers LIVE web show at StockCharts.com, and is also a Member of the CMT Association. Learn More
Subscribe to DecisionPoint to be notified whenever a new post is added to this blog!
comments powered by Disqus