A Shower of Breakouts

I have been talking a lot about breakouts lately, and that's because they are working. On Tuesday it was the financial sector's turn, as exhibited here in the Financial Select Sector SPDR (XLF). That breakout had legs, and the stock still has more room to run, as I have suggested would likely be the case. XLF -- Daily Source: Investools.com View Chart » View in New Window » But, after a 5% surge in just three days on the broad index, the group will most likely take a short breather pretty soon. To see what that might look like, here's the semiconductor sector -- as seen through the iShares PHLX SOX Semiconductor Sector Index Fund (SOXX) -- which broke out back in the middle of January and forced me to change my tune to bullish for the broader market. SOXX -- Daily Source: Investools.com View Chart » View in New Window » Notice how it shot higher, then worked sideways to higher for a few days, before it finally gave a small retracement. Then, it continued on to finish its first leg up. The financials are likely to do something similar. But that doesn't mean there aren't breakouts still looming elsewhere, and on Thursday the long-lost transportation index came to life as seen through the iShares Dow Jones Transportation Average Index Fund (IYT) ETF. IYT -- Daily Source: Investools.com View Chart » View in New Window » The surge higher likely caught many by surprise, but notice that it left a wide price spread and a high-volume anchor bar in its wake, and is now attacking the swing point with force on this time frame. Again, this is unlikely to fail, and in fact it is highly likely that this swing point will be taken out -- which will lead to an assault on the next swing point, as seen here on the weekly chart. IYT -- Weekly Source: Investools.com View Chart » View in New Window » A break of the next higher swing point, as seen here, on the weekly chart, would be a confirmation on the Dow Theory for a bull market continuation. Whether that ultimately happens remains to be seen, but clearly it appears the transports will give it a try. So, if you missed the financials' first thrust higher, let it retrace and catch the continuation. In the meantime, the transports are another important sector getting ready to try and do the same thing, and there are many names to choose from within it. In the railroads alone, plenty of stocks look ready to take out swing points or have already begun to do so. Canadian National Railway (CNI) and CSX (CSX), for instance, exhibit potential breakouts that could carry. Canadian National Railway (CNI) -- Daily Source: Investools.com View Chart » View in New Window » CSX (CSX) -- Daily Source: Investools.com View Chart » View in New Window » The same goes for Kansas City Southern (KSU), Union Pacific (UNP) and Canadian Pacific Railway (CP). Kansas City Southern (KSU) -- Daily Source: Investools.com View Chart » View in New Window » Union Pacific (UNP) -- Daily Source: Investools.com View Chart » View in New Window » Canadian Pacific Railway (CP) -- Daily Source: Investools.com View Chart » View in New Window » Another name that retraced to support, and now has flipped around, is Freightcar America (RAIL). This is a slightly different situation, but a valid trade as well. Freightcar America (RAIL) -- Daily Source: Investools.com View Chart » View in New Window » Then you can move over and look at others like FedEx (FDX), Hub (HUBG) or Uti (UTI), all of which are offering similar setups to the charts above. Even UPS (UPS) would be a good play if it gave us some sort of pullback to provide an entry. Finally, there are the shippers, which had already sparked a move a few weeks back. These, too, look interesting. Folks, the breakouts keep coming, and you have to keep rotating to them as they do. Ride them, then let them rest and move to the next group. Eventually you can come back to the rested sectors for a second round. For example, the chipmakers are now threatening round-two breakouts. Thanks for listening. Have a great day and weekend and, until next time, just keep trading the charts!

A Shower of Breakouts

Keep your eyes peeled, because they just keep coming. The transports just are the latest example.

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