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: Wall Street and Main Street both remain skeptical of the telecommunications bunch. Short interest has steadily chugged higher during the past three months, increasing nearly 50%. What’s more, the collective bunch has among the lowest “buy” percentage among the sectors that we track, with 29.5%. There are 58.4% “hold” ratings from the 166 total analysts’ opinions on telecom names, along with a hefty 12.1% “sells.” If any of the bears have a change in opinion, upgrades could continue to fuel a nice rally in the sector.

Outlook: The Telecom HOLDRS Trust (TTH ?40.70) bounced back on Friday to reclaim the support of its ascending 20-day moving average after pulling back with the rest of the broad market. What’s more, the exchange-traded fund (ETF) continues to hold support at the 40 level as it consolidates into its rising 10-week moving average. This trendline, in combination with the ETF’s 20-week moving average, has supported the security since late July 2006.

Materials (XLB)
Bullish
Sector trading above its…
20-day Moving Average: YES
50-day Moving Average: YES
100-day Moving Average: YES

Sentiment: Investors remains extremely skeptical of the Select Sector SPDR Materials Fund (XLB ?40.40). Options players have loaded up on put positions, pushing the Schaeffer’s put/call open interest ratio up to 5.25. In others words, put open interest among near-term options outnumbers call open interest by more than 5 to 1. In addition, the number of XLB shares sold short spiked by 27% in May to a 2-year high of 17.6 million. An unwinding of these bearish positions could help to add more fuel to the sector’s rally.

Outlook: The ETF bounced off support at its rising 50-day moving average last week, launching the shares back above support at their 20-day trendline. From a longer-term perspective, XLB has been in a solid uptrend along the support of its 10-week and 20-week moving averages since September 2006. Furthermore, the ETF has tacked on more than 16% since the start of the year, easily outpacing the broad market.

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

Sentiment: Investors have shrugged off the weight of rising fuel costs within the airline industry and continue to view the sector with complacency. Of the 61 analysts’ ratings on airline stocks, 52.5% of them are “buys.” While this doesn’t indicate that bullish sentiment is at a peak, exactly, it is rather cheerful given the performance of many component stocks of late. Additionally, the sector’s composite put/call open interest ratio weighs in at 0.81, lower than almost 73% of the past year’s worth of readings, suggesting a bullish lean from the options-trading contingent.

Outlook: The AMEX Airlines Index (XAL ?50.40) was recently rejected by resistance at its 50-day moving average and has continued its downtrend. Last week, the index shed nearly 4%, which was far steeper than the less than 2% pullback in the SPX during the same time frame. The index is also feeling pressure from its declining 20-day trendline. Fundamental and technical challenges should continue to stifle the XAL for the foreseeable future.