A year ago at this time, the market was jittery after the Federal Reserve raised interest rates for the first time in seven years. Investors were concerned that the Fed might increase again in 2016 and that the economy might not be able to handle it. As we know, they have done nothing since — and, one year later, the market is pricing in a 95% likelihood that we’ll get another increase when the Fed meets next week. Oh, and the market is at all-time highs.
As you would expect, investors have bid up stocks of companies that will thrive with higher rates, including banks and insurance companies. One name that Hilary Kramer and I recently recommended as a potential breakout stock is XL Group Ltd. (NYSE:XL).
As you can see on the chart below, XL took off after the election, running from around $34.50 to $38.50. It has pulled back since, holding above several support lines, including the 50- and 200-day moving averages. Also note that the 50-day trend line recently crossed the 200-day, creating another buy signal. And the relative strength index (RSI, at the top of the chart) that showed overbought above 70 early in the initial surge is now close to breaking back above 50, frequently a good buy signal as well.
Matthew McCall is founder and president of Penn Financial Group, an investment advisory firm. Matt also is Editor of FUTR Stocks and the ETF Bulletin. Earlier this year, Matt and Hilary Kramer teamed up on Breakout Stocks and ETF Trend Trader where Matt serves as the Co-Editor. Most recently, Matt and Hilary joined forces again. This time, they are helping individual investors make money trading ETFs. For more on their latest project, visit www.etfedgesummit.com.