Don't Ignore This Chart!

Dow and DuPont Lead XLB, and Threaten to Take Over the Sector


The sector SPDRs are weighted by market-cap and this means the biggest stocks carry the most weight. The Materials SPDR (XLB), for example, is dominated by Dow Chemical (11.86%) and DuPont (12%). These two behemoths are poised to merge and the combined company will clearly dominate XLB going forward. Chartists interested in XLB had best keep an eye on these two stocks for directional clues. 

The top window shows XLB with broken resistance turning into support in the 53-53.5 area (blue shading). Unsurprisingly, DD and DOW show similar support zones. XLB bounced on Tuesday with help from Dow and DuPont, both of which turned up over the last three days. These two stocks broke above last week's high and appear to be reversing their short-term pullbacks. Continued strength would bode well for XLB. Elsewhere, note that XOM (22.65%) and Chevron (17.13%) dominate XLE. 

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--Arthur Hill CMT

Plan your Trade and Trade your Plan

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at 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 market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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