Sector 1: A Bit of Housekeeping
Yesterday I teased about three sectors I have been focusing on recently, the first being what I call the “boring stocks.”
These company products are the type you find in your pantry, or under your sink, that are commonplace in every household, like Clorox Co (NYSE: CLX), Kraft Heinz Co (NASDAQ: KHC), and Campbell Soup Company (NYSE: CPB).
These stocks are basically “safe havens” when world events cause uneasiness about the future – similar to what we see in gold, which is also considered a defensive play.
Take CLX, for example.
During the COVID-19 pandemic, everyone was back-stocking as much Clorox as they could get their hands on!
We all had (probably still have) so much Clorox under our sink, we didn’t need to go out and buy more.
So, it isn’t too surprising that we had a big dip following earnings last month:
Clorox Co (CLX) Stock with Fibs – Feb. 28Why would I be interested in a stock like this?
In spite of that dip, in more recent weeks this company’s stock has held up quite nicely as the rest of the market dropped.
And more notably, consumer staples stocks have been among the best S&P 500 performers in 2022 – a slot that usually belongs to big tech – as we discussed yesterday. (If you weren’t able to attend yesterday’s LIVE session, you can catch up on my Replay page.)
Sector 2: C is for Citi, and That’s Good Enough for Me…
In Florida, ice cream trucks run pretty much 24/7 – which means I hear the “C is for Cookie” song by Cookie Monster at least once a week when I am outside.
Rather than let that spoil my appetite, I’ve decided that “C” is for Citi, or Citigroup (C), which allows me to segue into an analysis of the Financial Sector!
Financial Select Sector SPDR (XLF) ETF – Feb. 28Why the Financial Sector?
This month the Federal Reserve is expected to start raising interest rates, and that often hurts stocks.
However, some stocks actually tend to go higher with interest rate hikes!
Banks, brokerages, and insurance companies make money when interest rates are raised, so this is a sector that is piquing my interest (no pun intended).
Only time will tell if we see a “buy the rumor, sell the news” situation around the Fed, but I have my sights set on two banks in particular right now; Citi and Bank of America Corp (NYSE: BAC).
Citigroup Inc (C) stock with Fibs – Feb. 28
Bank of America Corp (BAC) stock with Fibs – Feb. 28Why these two banks?
The first reason I already explained above: because rate-hike chatter, not to mention concerns about inflation, should keep the Fed – and, thus, banks – in focus in the near term.
The second reason is that when the market dipped, these two bank stocks gapped down – but they both bounced back rapidly from their late-2021 lows.
If you weren’t able to watch the LIVE session where I discussed these stocks yesterday, you can find the replay here…
Sector 3: Barrels of Profit?
The last sector I am focusing on is Energy, and more specifically the United States Oil ETF (USO).
Oil is the strongest sector in the market right now, as the Russia-Ukraine conflict has fueled concerns about global crude supplies
It seems USO shares are making new highs and higher lows constantly, with black gold recently topping $100 per barrel.
In fact, if we are looking only at Closing Prices, USO made a new high yesterday!
United States Oil (USO) with Fibs – Feb. 28Why USO?
As we approach the summer months, more and more people will be traveling… and that takes energy.
As demand for oil in the US increases during the summer, and considering the uncertainty in Eastern Europe, we could see this pattern – which has been happening for 14 years – continue.
In fact, I’m anticipating oil will continue to rise in the coming months, maybe going as high as $150 per barrel.
But I won’t make any trades unless my proprietary tools – like in Operation Surge Strike – tell me the time is right.
If you want to review my analysis on oil, gold, and other commodity assets, check out yesterday’s replay!
That’s all for today, but be sure to join me at 11:30 a.m. ET for my special Volatility Debrief,
Tom Gentile
America’s #1 Pattern Trader
