Serge Berger is the head trader and investment strategist for The Steady Trader. Sign up for his free weekly newsletter.
Industrial Select Sector SPDR (NYSE:XLI) — On Aug. 2, I wrote that industrial stocks were setting up for a short-side opportunity as the ETF had broken a major uptrend a couple of days prior.
Since then, XLI has fallen roughly 14%, and yesterday reached our profit target at $31. The target at $31 was the measured move of the head-and-shoulders pattern in place.
The weekly chart is beyond broken, and given the near-term significantly oversold levels just about everywhere, a trade to the upside may now be setting up. Given the major break on the weekly charts, however, it is important to note that I think XLI will eventually have lower to fall still.
In the near term, though, looking at the massive 16% sell-off in just 11 trading days, a fairly quick rally of around 10% is not out of the question.
If we look at the daily chart and zoom in on the sell-off from July 22 to yesterday, then a 50% retracement would take us to roughly $33.50.
An entry point at $29.50 with a stop around $28.50 and a target near $33 is what I see as a decent trade idea here. I must reiterate, however, that all the major stock indices have broken their daily and weekly charts and selling the rallies is now the game.
- See Sam Collins’ Daily Market Outlook: Why We Haven’t Seen the End of This Sell-Off
- See Serge Berger’s Daily Market Outlook: Relief Rally Could Provide Bulls a Quick Trade
- See Sam Collins’ Trade of the Day: A 9% Dividend to Help Ease the Market Pain
