My Stock Winners

Telecommunications (TTH)
Bullish
Trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Pessimism dominates the sentiment backdrop of the telecommunications sector despite its impressive technical uptrend. In fact, Wall Street continues to wager against the group. Of the 161 analysts ratings on the components of the Telecommunications HOLDRS Trust (TTH ?40.47), less than 29% come in at a “buy,” while a robust 11% rate them a “sell.” This bearish configuration leaves ample room for potential upgrades across the sector. What’s more, the number of the exchange-traded fund’s (ETF) shares sold short jumped sharply in April, pushing its short-interest ratio even higher to more than 10 days to cover. This growing short interest underscores the pessimism that continues to surround the sector.

Outlook: Technically speaking, the ETF has overtaken psychological chart resistance at the 40 mark and hit a new annual high late last week. What’s more, the trust remains in a long-term uptrend, rising along the support of its ascending 10-week and 20-week moving averages. As pessimism toward telecommunications stocks unwinds, it should add more buying pressure, keeping the group aloft.

Sector
Utilities (UTH)
Bullish
Trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Skepticism is extremely heavy in the sentiment backdrop of the utilities sector as well. Wall Street has placed some heavy bets against the group as less than 27% of the 183 analyst ranking on the components of the utilities sector come in at a “buy.” Any upgrades from this dour group could help to add more lift to this sector. Despite the fact that the number of Utilities HOLDRS Trust (UTH ?151.80) shares sold short dropped by 12% in April, the ETF still has a hefty short-interest ratio, pointing to high levels of pessimism among short sellers.

Outlook: The shares of UTH have moved sideways recently, consolidating into support at their rising 20-day moving average and hurdling through the 150 level. In addition, an unwinding of the existing pessimism toward the sector should help to fuel further gains in the sector.

Sector
Airlines (XAL)
Bearish
Trading above its…
20-day Moving Average: YES
50-day Moving Average: NO
100-day Moving Average: NO

Sentiment: Optimism permeates the sentiment backdrop of the airline sector despite its weak technical performance. Wall Street is enamored of the group, as roughly 52.5% of the analysts ratings on the components of the sector come in at “buy.” Any downgrades from this optimistic pack could fuel additional losses in this group. Options players have yet to levy heavy bearish bets against the group, as the composite Schaeffer’s put/call open interest ratio sits lower than roughly 70% of the readings taken during the past year. This complacency against the sector’s weak technical backdrop has bearish implications from a contrarian perspective.

Outlook: The AMEX Airlines Index (XAL ?51.26) remains in a steep intermediate-term downtrend beneath its 10-week and 20-week moving averages, which have acted as paired resistance since February. In addition, the XAL’s 50-day moving average is also approaching the shares and could add another layer of resistance, keeping the group moving lower during the near term. A rejection at either these trendlines could result in further downside as the remaining optimism unravels in the form of increased selling pressure.