My Stock Winners

Telecommunications (TTH)
Bullish
Sector 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 160 analysts ratings on the components of the Telecommunications HOLDRS Trust (TTH ?40.80), less than 30% 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.

Outlook: Technically speaking, the ETF continues to consolidate its recent gains along support at the 40.50 level. The security is also moving into support at its ascending 20-day moving average, which has carried the shares higher since mid-March. 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.

Utilities (UTH)
Bullish
Sector trading above its…
20-day Moving Average: NO
50-day Moving Average: NO
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 189 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. Meanwhile, the number of Utilities HOLDRS Trust (UTH ?145.88) shares sold short rose by 2% in May, the ETF still has a hefty short-interest ratio, pointing to high levels of pessimism among short sellers.

Outlook: The shares of UTH fell sharply last week, dropping below support at their 20-day moving average. However, the trust is still trading above support at its 80-day and 100-day trendlines. Furthermore, support in the form of the equity’s 20-week trendline is moving into the region to add another layer of support. UTH has finished only 3 weeks below this trendline in more than a year. A bounce off support at the 145 level could bring in more of the bears from the sidelines, pushing it even higher.

Airlines (XAL)
Bearish
Sector 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 61% 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 ?51.35) 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 index continues to be capped by resistance at its 50-day moving average. A rejection at either these trendlines could result in further downside as the remaining optimism unravels in the form of increased selling pressure.