- Biotech and Defense/Aerospace Show Leadership.
- Creating a ChartList with ETF Holdings.
- 3 Defense-Aerospace Charts to Watch.
- 3 Biotech Charts to Watch.
Chartists looking for bullish stock setups can use industry group ETFs as the first filter. It is easy to find ETF components, upload them to a ChartList and scroll through the charts looking for setups. Let's see how this process works.
The Aerospace & Defense iShares (ITA) and the Biotech iShares (IBB) hit new 52-week highs this week and this means these groups are leading the market. ITA is part of the industrials sector, while IBB is part of the healthcare sector, which is one of the strongest sectors in the market right now. I noted bullish patterns in ITA on August 19th and IBB on August 22nd.
Creating a ChartList with ETF Holdings
Chartists can find the components for ITA and IBB at the iShares website. These can be downloaded into an Excel file, copied into a clean Excel sheet, saved as a CSV file and then uploaded to a ChartList. From here, Chartists can scroll through the charts to find bullish setups using their preferred method. This Support Center page will tell you all about ChartLists and it includes four videos. In the meantime, here is a quick video showing the steps.
Three Aerospace-Defense Charts to Watch
The first chart shows Rockwell Automation (ROK), which also happens to be in the new Loup Frontier Tech ETF (LOUP). The stock corrected hard from January to April, but turned up over the last few months. After a gap-surge in late July, the stock corrected into August with a move to the low 170s. It looks like another higher low is forming as the stock turned up this week with a short-term breakout.
Next up is Lockheed Martin (LMT), which is one of the larger defense contractors. The stock was hit hard in spring and again in early summer. There was a sharp rebound in July and then a wedge correction in August. My eyes are on the wedge breakout because it was strong and it signals a continuation of the July advance.
The next chart shows Rockwell Collins (COL), which is strongest of these three stocks. Why? Because it is the closest to a 52-week high and the stock fully rebounded after the spring slump. A bullish ascending triangle is taking shape and a breakout would signal a continuation of the bigger uptrend.
The next CandleGlance charts show Kratos Defense (KTOS), L3 Tech (LLL) and Harris Corp (HRS) with surge and short-term consolidations. Upside breakouts would be bullish here.
Three Biotech Charts to Watch
The first biotech chart shows Gilead (GILD) surging from May to July and the 50-day EMA crossing the 200-day EMA in late July. The stock then corrected into August with a 50% retracement, which is normal for a pullback within a bigger uptrend. Notice that broken resistance turned into support as the stock bounced off the 50% retracement. Also notice that RSI dipped below 30 last week.
The next chart shows Alexion (ALXN) with a triple bottom and a breakout in July. Admittedly, I have taken a little liberty with the annotations because the March spike cuts through resistance. However, there is some sort of basing pattern and there is a clear breakout in July. The pullback into August, while deep, retraced just over 61.8% of the April-July advance and this is normal for a correction. More importantly, it looks like the correction ended as the stock turned up this week.
The third chart is the strongest of the three because Jazz Pharamceuticals (JAZZ) hit a new high in June. The stock corrected with a pullback over the last two months and RSI dipped below 30 last week. Hmmm... short-term oversold in a long-term uptrend. RSI moved back above 30 on Monday as the stock bounced the last three days. It looks like a mean-reversion bounce is underway.
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Plan Your Trade and Trade Your Plan.
- Arthur Hill, CMT
Senior Technical Analyst, StockCharts.com
Book: Define the Trend and Trade the Trend
Twitter: Follow @ArthurHill
