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Industrial Sector Stocks Technical Analysis - Industrial Sector Stocks Trading: 2017-11-07
Earnings season ends in the US
In this review, we suggest considering the personal composite instrument (PCI) "Stock index - industry". It includes the stocks of the largest US industrial companies. The Industrial_Stocks index may decline, amid the emerging difficulties with the approval of the US President Donald Trump’s tax reform. Market participants fear that its implementation will require much more time than planned. In addition, a significant part of the reform may be contracted.
Since mid-June, 2017, the US WTI oil has increased by a third and reached a 2-year high. In addition, the prices of other energy carriers, industrial metals and other raw materials have risen. This may become a significant negative factor for the financial state of the US industry depending on the commodity market. Another negative factor lies in the consistent rate hike policy of the Fed, which can increase the loan debt burden of the manufacturing companies. Note that currently about 400 companies from the S&P 500 list have reported. Their total profit for the Q3, 2017 increased by 8%. This slightly exceeds the forecasted growth of 5.9% before the publication of the reports. Since early October, the growth of the PCI "Stock index - industry" was about the same and amounted to 1.7%. At the same time, the Dow Jones Industrial Average index rose by 5%. We do not exclude that the factor of the quarterly reports will no longer be relevant, since most of the companies have already published their financial performance.
On the daily timeframe, Industrial_Stocks: D1 remains in the rising trend, but its growth has slowed down and some technical analysis indicators have formed Sell signals. The downward correction is possible in case of the publication of negative economic and corporate information in the US, as well as in case of some problems in Trump’s tax reform.
- The Parabolic indicator gives a bearish signal.
- The Bollinger bands have narrowed, which means lower volatility.
- The RSI indicator is above 50. It has formed a negative divergence.
- The MACD indicator gives a bearish signal.
The bearish momentum may develop in case Industrial_Stocks drops below the two last fractal lows and the lower Bollinger band at 124.8. This level may serve as an entry point. The initial stop loss may be placed above the last fractal high, the historic high, the upper Bollinger band and the Parabolic signal at 130.8. After opening the pending order, we shall move the stop to the next fractal high following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 130.8 without reaching the order at 124.8, we recommend cancelling the position: the market sustains internal changes that were not taken into account.
Summary of technical analysis
| Position | Sell |
| Sell stop | below 124,8 |
| Stop loss | above 130,8 |
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Note:
This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.
