Trading Places with Tom Bowley

Are We Seeing Significant Rotation? Check Out These 3 Industry Groups

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The secular bull market is alive and well and the list of industry groups in breakout mode is growing. In addition, there are a few on the cusp of a breakout that bear watching. When a group breaks out, money flows to that area, creating tons of trading/investing opportunities. Today, I'll focus on 3 areas that you really should be paying attention to.

Media Agencies ($DJUSAV) Have Broken Out

Media agencies printed a top on June 8th, the day that many weaker market areas topped. While many of those areas have yet to test or even approach that high, don't count media agencies among those groups. The DJUSAV has broken out and its PPO is accelerating. The AD line and volume trends have both strengthened and the chart looks better than it has in months:

There is still more relative work to do here, but the DJUSAV is on my radar and it should be on yours too. One stock in this space that's been a leader and has an AD (accumulation/distribution) line at a 52 week high will be featured tomorrow morning in our free EB Digest newsletter. CLICK HERE to sign up for this newsletter. There's no credit card required and you can unsubscribe at any time.

Apparel Retailers ($DJUSRA) Are On The Verge Of A Breakout

This is a compelling chart. Take a look at it and note the big difference in the AD line during the advance through June 8th and the more recent strength:

The AD line was falling during the huge advance into early summer. That's a sign of distribution, and that rally ultimately failed. This time, we're seeing not only the AD line rising to support this move, but we're also seeing the group's relative strength move to a 3 1/2 month high. In other words, money is beginning to rotate towards apparel retailers. I'm a HUGE secular bull market believer, so my primary question is....."what is going to lead during Q4?"

On our Strong Earnings ChartList, where we organize the companies that have produced the best fundamental quarters, we currently have 9 apparel retailers. There are 4 with SCTR scores above 90, so they're already showing tremendous relative strength. A breakout in the DJUSRA would further aid these budding leaders. Our EarningsBeats.com members are already armed with this information. Are you?

Some of these previously beaten-down pandemic groups have a serious opportunity to lead and we need to remain focused on what's taking place beneath the surface of the S&P 500.

Restaurants ($DJUSRU) Are Cooking Up A Breakout

Talk about a message being sent by the stock market! In the midst of a 100-year pandemic with a virus that continues to spread throughout the U.S., and with a high profile case this past weekend with President Trump, restaurants have now nearly doubled since their March low and are within a fraction of their highest level ever - a 2096.18 intraday high on September 6th, 2019, exactly 13 months ago today. Yesterday, restaurants closed at 2089.97 after hitting nearly 2094 intraday. Here's the chart showing the 52 week high:

There are so many positives on this chart, but the two key missing pieces are (1) a close above 2100 to get that all-time high, and (2) a relative breakout above the February 2020 high to confirm the rotation of money into the space. When that happens, we'll be prepared. On our Short Squeeze ChartList, there's one restaurant stock that has 34% of its float short, even though it's been trending higher for 6 months. If restaurants break out with money rotating there on a relative basis, I can only imagine the box that many short sellers will find themselves in as a potentially-massive short squeeze awaits.

I'm a firm believer that stock prices are going higher. However, the big question mark revolves around leadership. I plan to stick with the current leaders for now, but I'm open to the possibility that we could see leadership change in a big way as the market looks ahead to "business after COVID-19".

If you'd like to try our service at EarningsBeats.com, we currently offer a fully-refundable $7 30-day trial that I believe you'll truly enjoy. You can sign up HERE.

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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