XLY trade ideas
How much will overbought Consumer Cyclicals Sector Fall? XLYThe Consumer Cyclical Sector SPDR Fund has been in a bull trend since the end of the financial crisis. An internal and stronger bull trend has taken shape since the US elections in November 2016. However, this fund is currently at its long-term resistance point which will most likely lead to one of two future moves. The fund could break above this long-term resistance and continue strong gains, or it could reverse course and at the very least return to its support established since the election. Below I have laid out the reasons and levels to which the fund may dip will it continue its overall bull trend.
When we take a look at technical indicators, the relative strength index (RSI) is at 70.8987. RSI tends to determine trends, overbought and oversold levels as well as likelihood of price swings. I personally use anything above 75 as overbought and anything under 25 as oversold. Currently the RSI is below overbought levels. The fund could rise over the next few days or begin its descent now. The three previous overbought levels are annotated with the vertical blue line on the chart above. The drop from this overbought level occurred on all occasions, but the near-term drop in February was minimal.
The true strength index (TSI) is currently 17.4983. The TSI determines overbought/oversold levels and/or current trend. I solely use this as an indicator of trend as overbought and oversold levels vary. The TSI is double smoothed in its calculation and is a great indicator of upward and downward movement. The TSI has been stuck in a positive but limited channel since December 2016. This indicator has begun to move up again. Although this is a delayed indicator, it may point to upward movement for the fund.
The positive vortex indicator (VI) is at 1.1761 and the negative is at 0.7501. When the positive level is higher than 1 and higher than the negative indicator, the overall price action is moving upward. When the negative level is higher than 1 and higher than the positive indicator, the overall price action is moving downward. These indicators have been slow moving but currently show the fund moving up.
The stochastic oscillator K value is 97.0441 and D value is 94.0369. This is a cyclical oscillator that is highly accurate and can be used to identify overbought/oversold levels as well as pending reversals and short-term activity. I personally use anything above 80 as overbought and below 20 as oversold. When the K value is higher than the D value, the stock is trending up. When the D value is higher that the K value the stock is trending down. The stochastic is currently well overbought, but the D value has not overtaken the K value, meaning the fund could produce gains for a few more days before ultimately turning downward. All similar stochastic overbought levels since the election are annotated on the chart above with a vertical orange line. All seven instances lead to a drop in the fund.
Considering the RSI, TSI, VI and stochastic levels, the overall direction favors a move to the downside. Based on historical movement compared to current levels and the current position, the fund could drop at least 2% over the next 25 trading days if not sooner.
Short XLY (Long term 1 year)Long term trade here. Consumer spending in the US not likely to return. Higher borrowing costs with house hold debt near all time highs is not doing anyone any good.
XLY: A technical overview of top 3 weighted holdingsSummary: Comcast and Home Depot dragging down price. Amazon is keeping it from falling further
XLY/XLP Ratio - Murphy2009 Cross -> bullish (like Murphy described in his book)
2016 Cross -> bearish?
Testing strong daily resistance zone$XLY just hit a strong daily resistance zone after bouncing from the 200 days MA.
The Resistance Zone includes several trend lines that now collide into one 1$ wide Price Zone that should prevent $XLY from advancing higher.
79-80$ is the potential Sell Zone
Stop loss should be above 82$ and first target Zone is 77$ (200 days MA)
Below 77$, things can turn into a Free Fall mode.
Tomer, The MarketZone
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XLYWeekly chart of XLY since 2009 bottom. Looks to be forming possible H&S top with RSI bearishly diverging. May not confirm H&S, but not one to be long, IMO.
Also, note numerous high volume DOWN days with very few high volume UP days. (See box in lower right hand corner)
XLY going downWhen signs of an economic recovery appear, consumer discretionary stocks usually lead a stock market recovery. Consumer discretionary stocks tend to outperform the stock market during strong economies, but they generally underperform in weak economies. The stocks of of consumer discretionary companies tend to lead a general stock market decline at the beginning of a recession.
Staples seems getting strong again, against cyclicalAs you can see there is a Heand & Shoulders going on, and under the WMA 200
Is the rally near to end?
xly/spy enough is enough ?this one streched it self . . . very strong !!!
does trees grow up to the sky ?
neiher will stocks.
Neg. Weekly RSI divergence on the XLYLooking for a potential short in the XLY, as its main components AMZN, DIS, getting hit. AMZN showed a negative RSI divergence on the daily chart, the first time in a long long while. Probably won't initiate position until AMZN and DIS, NKE recovers a little.
Bounce expectedmany sectors at major support, unlikely that they dont hold. Should see a bounce in the market here after such a rapid sell off.
