Trading Places with Tom Bowley

This Technology Group Has Finally Become A Leader, Plus Two Stocks To Benefit

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For the past few years, I've written countless articles on semiconductors ($DJUSSC), software ($DJUSSW), and computer hardware ($DJUSCR) as these three industry groups have led a powerful charge in technology. But other industry groups in this sector have failed to participate to the same degree (or even close to the same degree). That has begun to change as the relative strength line in electrical components & equipment ($DJUSEC) is exploding higher. Check out this 3 year weekly chart on a relative basis:

This development will only add to strength in technology in the weeks ahead, in my opinion. Once you see relative strength like we see in the top panel, it's time to begin searching for leaders in this space. One way to do that is to simply run a scan against the entire industry and using the SCTR as a filter to find recent top performers. Here's the scan that EarningsBeats.com members can run:

This is a very practical way to see a new trend emerge and quickly zero in on potential winning trade candidates using our proprietary research at EarningsBeats.com. FLEX recently gapped higher due to a report that the company could spin off a part of its business. I tend to ignore companies with news like that, because if management comes out and denies those rumors, we can see a quick return to the pre-gap level. But the other two of the top three stocks listed above look promising to me.

AMSC:

AMSC announced a secondary public offering this past week and that's the reason for the selling. We could see additional lingering short-term weakness because of this supply issue, but beyond that I see AMSC returning to new highs, especially given the market's sudden fascination with the group. Price support between 13-14 would be the best entry level.

OESX:

The problem with OESX was that it's short-term momentum waned, resulting in a negative divergence. I look for those to resolve with 50 day SMA and/or PPO centerline tests. The PPO is nearly back to its centerline support and OESX nearly tested its 50 day SMA. While we could see additional consolidation and perhaps even that 50 day SMA test, I like OESX longer-term. A 20-25% move higher to simply retest recent highs would be a very nice trade.

If you'd like to begin experiencing the power of our professional research platform to combine with the awesome tools and features at StockCharts.com, please take me up on my fully-refundable $7 30-day trial. You can CLICK HERE to get started!

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist of EarningsBeats.com, a company providing a research and educational platform for both investment professionals and individual investors. Tom writes a comprehensive Daily Market Report (DMR), providing guidance to EB.com members every day that the stock market is open. Tom has contributed technical expertise here at StockCharts.com since 2006 and has a fundamental background in public accounting as well, blending a unique skill set to approach the U.S. stock market. Learn More
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