Friday, April 24, 2009

Add These 2 Sectors To Your Watchlist

I previously identified "4 Sectors That Could Be The Next Bull Market Leaders", and today I think we can add two more to our watch list.

Figure 1 is a monthly chart of the AMEX Networking Index (symbol: $NWX.X) with the "next big thing" indicator in the lower panel.  The indicator indicates the potential for a secular trend change. The price action has been very strong as this index has broken its down sloping trend line, and the index has the possibility of closing the month above the simple 10 month moving average. Broadcom (symbol: BRCM) and Cisco Systems (symbol: CSCO) are two stocks in this sector that have similar setups.

Figure 1. $NWX.X/ monthly

Figure 2 is a monthly chart of the Healthcare Information sector; this data comes from the Morningstar Industry Groups.  The "next big thing" indicator is in the middle panel, and it is not in the zone where we would expect a secular trend change.  However, the price action has been consolidating for quite some time, and we know this because the indicator in the bottom panel looks for statistically relevant periods of consolidation.  These are excellent launching pads for new bull markets.  As you can see, the price action has been good with a likely end of the month close over both a down sloping trend line and the simple 10 month moving average.  An example of a stock in this sector would be Cerner Corporation (symbol: CERN).

Figure 2. Healthcare Information/ monthly

I have presented 2 more sectors that might be leaders in the next bullish run; certainly, having the overall market move higher would be a necessary tailwind to the development of these secular stories.  Over the intermediate term (weeks), I still expect market weakness.

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