REVIEW OF RECENT STOCK BREAKOUTS AND A LOOK AT SOME THAT ARE CLOSE -- SUNTRUST BANKS TESTS OCTOBER HIGH -- JP MORGAN CHASE MAY BE NEXT BIG FINANCIAL BREAKOUT -- KB HOME IS LATEST HOMEBUILDER TO TURN UP -- AK STEEL BREAKS OUT IN STRONG STEEL GROUP
REGIONAL BANK LEADERS... I've written several articles recently on three underperforming stock groups just starting to turn up. The three groups are financials, homebuilders, and steel. I've shown several stocks in each group that have achieved bullish breakouts, and some stocks that were close to doing so. So far, all of the upside breakouts have held up very well. And some of the impending upside breakouts have taken place. I'm going to review some of them today, and show a few more that are close to turning up. Regional banks have been one of the market's strongest groups during December and again today. Regional Bank Holders are today's strongest ETF (along with financial stocks in general). Two leading stocks in that group that I showed a couple of weeks ago are plotted below. Chart 1 shows Huntington Bancshares turning back up after a minor pullback to its November high near 6.25. Its relative strength line (below chart) has turned up as well. Chart 2 shows PNC bouncing off its 200-day moving average. Once the 200-day red line is exceeded on the upside, it should act as a support level on pullbacks. Chart 3 shows a new leader in the group that's on the verge of a bullish breakout. Suntrust Banks is challenging its October high at 28. STI is the top percentage gainer in a strong financial group today.
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Chart 1
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Chart 2
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Chart 3
FINANCIAL LEADERS... The financial sector has been the strongest December market gainer. The largest XLF holding is Wells Fargo which enjoyed a bullish breakout earlier in the month. Chart 4 shows WFC hitting a new seven-month high today after a minor pullback. Its RS line has been rising since mid-October. The second biggest XLF holding is JP Morgan Chase. Unfortunately, that big financial stock has yet to achieve a bullish breakout. But it may be getting close. Chart 5 shows JPM trading above its 200-day moving average and nearing a test of its second half highs. It may be the next big financial breakout. Another financial laggard worth watching is Morgan Stanley. Chart 6 shows MS coiling in an apparent "symmetrical triangle" since October. [A symmetrical triangle is defined by two converging trendlines and is normally a continuation pattern which in this case is bullish]. MS is climbing above its 200-day line.
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Chart 4
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Chart 5
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Chart 6
ADD KBH TO HOMEBUILDER BREAKOUTS... Last Thursday's message showed upside breakouts in leading homebuilders which included Lennar (Chart 7) and NVR (Chart 8). Both continue to act very well. Chart 9 shows another homebuilder achieving a bullish breakout. KB Home surged yesterday to a new six-month high and exceeded its 200-day moving average. All three relative strength lines (below charts) have turned up. Homebuilders were yesterday's strongest market group. It looks like stock investors are moving into formerly "unloved" groups like financials and homebuilders. That's a positive sign for those groups and the market as a whole.
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Chart 7
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Chart 8
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Chart 9
STEEL ETF HITS NEW HIGH -- AKS BREAKS OUT... I've devoted the last two Tuesdays to bullish articles on the steel group which represented the cheapest part of the commodity universe. It's not as cheap anymore, but is still acting very strong. In fact, steel was the strongest market group last week (and again today). I last showed the Market Vectors Steel ETF (SLX) testing its April high. Chart 10 shows the SLX exceeding that resistance point today. [It's the last commodity-related stock ETF to do so]. One of the steel leaders today is Allegheny Technologies. Chart 11 shows ATI breaking through its spring high today. [Other steel stocks to do so include Cliffs Natural Resources (CLF), Ternium (TX), and Schnitzer Steel (SCHN)]. The day's top performer in a strong materials sector is AK Steel. I showed that stock last Thursday on the verge of a bullish breakout. Chart 12 shows that bullish breakout having taken place. The fact that commodity-related stocks continue to show market leadership is a vote of confidence in global growth. That's good for stocks and commodities, but potentially bad for bonds. The upturn in financials and homebuilders also takes a big weight off the stock market and the US economy. While steel stocks may still represent the best commodity value, financials and homebuilders may present the best value in the entire market.
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Chart 10
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Chart 11
