A Sector That Is MOOving

When going through charts at the end of each day, I make a mental note when I see multiple stocks in the same sector or industry group catching my attention.

Several weeks ago I noticed multiple steel stocks suddenly showing spark. That sector was written off for dead quite some time ago. And then multiple stocks are breaking resistance or logging nice up-trends? I first mentioned US Steel (X) back in the September 27th, 2013 newsletter, saying “US Steel does not have great fundamentals, but the steel stocks on a whole have been picking up. I usually prefer trades only on quality stocks, but sometimes I do small speculative trades when I see a high probability chart pattern.

X broke out of a five-month ascending channel. The volume pattern is showing accumulation, and the On Balance Volume indicator's chart confirms it”

The chart of US Steel, at that time, looked like:

US Steel's fundamentals have improved slightly since then, but accumulation of the stock has been very evident in the On Balance Volume indicator, the Up/Down Volume Ratio indicator (currently 1.5), and Investor's Business Daily's Accumulation/Distribution rating (currently B+).

In the 9 weeks since September 27th, X has gained 30.6%:

This weekend, the industry group that caught my attention was Agricultural Chemicals. They usually have a good seasonal pattern, meaning track record for gains, at various parts of the year. But this year the various stocks in the industry group have had varying degrees of success.

Once a few of the component stocks caught my attention, I looked at the Market Vectors Agribusiness ETF with the symbol MOO. MOO was in a clear downtrend from the beginning of the year through August. Then in early September, the ETF changed character:

MOO has been in existence only 6 years and that's too short to draw any conclusions about seasonality. But the ETF has developed a clear up-trend lasting 3 months now.

Since MOO isn't active enough or have enough trading history to analyze a seasonal track record, I look at the top holdings of the ETF. Most of them should be pretty familiar names with traders and investors – Monsanto, Archer-Daniels-Midland, Deere, Potash, Mosaic, and Agrium.

Now I didn't find a lot of impressive fundamentals in this group. But the charts of a few of the stocks reminded me of US Steel 9 weeks ago. Perhaps this recent movement is due to institutions looking ahead to improving fundamentals next year.

The top holdings of MOO are worth investigating and watching. For today's Seasonal Forecaster newsletter, I've picked the one that is offering the best trade right now, a covered call with dividend capture that could return 6% over the next 18 days. I also cover two bull put credit spread trades on other stocks that could each return 10% or more over the next several weeks with a very high probability of success.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, type in www.markettamer.com/seasonal-forecaster

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2013 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

 

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