To piggyback this post from Monday night, we have seen so many time throughout the March 2009-present bull market where a major sector or marquee stock will breach a 200-day moving average, get everyone nice and bearish, and then stabilize and rocket to new highs in the following weeks or months. Indeed, the main thing to note is the direction of a significant long-term moving average like the 200-day, for it captures the character of the 200 days of trading heretofore. And that should count more than a momentary undercut of it.
Nonetheless, at some point a rising 200-day moving average will betray the bulls and fail to act as a magnificent buying opportunity at the expense of eager bears. I am not quite sure the utilities and REITs are precisely at that bull trapping juncture. But looking at both sector ETF daily charts, the first two below, it is hard to make the case that they are assuredly stabilizing at their respective 200-day moving averages.
In fact, they both appear vulnerable to further weakness, breaking down from clear bear flag patterns. The volume patterns are also not particularly compelling for the bull case. This is a concept I have discussed on my video recaps for a while now; the idea that if you are a long-term investor looking to bottom-feed these sectors then it would behoove you to slowly space out your buyers throughout the summer rather than time the bottom all at once.
For a specific REIT short idea, consider CXW, third chart below. I charted this in the spring for its diamond topping pattern which has clearly triggered and continues to be the controlling bearish pattern, as the daily looks to be on the cusp of another bear flag breakdown.
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Things lining-up nicely for CXW to move to 26.xx. Hopefully, there’s trouble in the prison industrial complex.
Haha nice