Reduce Positions In Energy As It Becomes Riskier (XLE, SMH, IBB, EWY, EWO, XLP, SPY, GLD, EWJ, IGN)

While we still like the strong uptrend in energy (NYSE:XLE), its risk has increased so much that we are reducing our position in it. Though the uptrend goes back to the Fall of 2010, during the past several months, the price has been moving sideways. On the other hand, the lows from mid-May have not been broken.

  • @chewtonic: $XLE, $XLB have outperformed $XLV, $XLP etc…another reason not to get overly bearish just yet.
  • @fallondpicks: Strongest sector is Energy ($XLE) at 35% bullishness. Weakest is Industrials ($XLI) at 6%.

Since we are reducing our position in the Energy Select Sector SPDR ETF (NYSE:XLE), we are also recommending semiconductor (NYSE:SMH) and biotech (NYSE:IBB). Both of these funds are is in definite uptrends that go back to the Fall of 2010. SMH has moderate risk — it has dropped since the beginning of May, but the mid-March lows remain unbroken. IBB’s risk is mild right now. In fact, it has the lowest risk of all the funds that we follow, though even its risk has increased.

  • @daytradingzoo: I’m going to look in the $SMH $XHB $XLB $XLI $XLK $XLY space for long setups.

South Korea (NYSE:EWY) is also in a strong uptrend, but it has a huge risk and the trend itself is unstable. It’s possible that a new downtrend is developing starting from the high of May 2. Friday’s price is close to the recent low from May 23 and has broken the low from April 12. Austria (NYSE:EWO) is in a definite uptrend with bearable risk. It jumped up in mid-March then dropped more recently since the end of April.

Besides IBB, another relatively low risk fund is consumer staples (NYSE:XLP). Again, though, the drop from the May highs has increased its risk.

Large-cap stocks (NYSE:SPY) have only a moderate uptrend. Over the past six months, they’re up +2.5%, compared with 11.26% for XLE. Gold (NYSE:GLD) has a huge risk as its price jumped up and down at the end of April / beginning of May.

Continue staying away from Japan (NYSE:EWJ). It remains in a definite downtrend with no changes. Another fund to stay away from is networking (NYSE:IGN). Its trend has turned negative over the past week as it broke through the support going back to January.

  • @5xBEAR: bought June puts at $EWJ 10.50… Expires next week then i’m out.

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