Woods: Great start to the year with a broadening market
Speakers
Jay Woods
— Chief Global Strategist at Freedom Capital Markets
Summary
Jay Woods of Freedom Capital Markets says the new year has started with a broadening market as more sectors participate to the upside. He sees technical breakouts in materials via XLB and defense via ITA, while energy via XLE has faked out and needs price confirmation. In transports, he points to airlines, FedEx and UPS, with cheap oil as a catalyst, and he pitches Regions Financial on Southeast growth.
- Market breadth is improving beyond technology, which Woods calls bullish.
- Materials (XLB) broke out of a long base and has room to run.
- Defense (ITA) has broken out and offers a risk-reward entry.
- Energy (XLE) faked out and needs price confirmation.
- Transport strength is supported by cheap oil, airlines, FedEx and UPS.
- Woods also highlights Regions Financial's Southeast growth exposure.
Ideas
Market broadening is very bullish.
Woods says the year has started strong with the market broadening beyond technology, more participants to the upside, and investors shrugging off headline risks; he calls this breadth very bullish for U.S. equities.
Energy fakeout needs price confirmation.
Energy looked like it would break out, with Exxon, Chevron and Valero spiking, but the sector hit key resistance and faked out; Woods says XLE needs price confirmation before he would jump into the sector even though everyone is talking about it.
Materials broke out, room to run.
The materials sector's XLB broke out of a nice year-long base and has room to run, helped by silver and gold and with packaging stocks starting to pick up steam; Woods sees anything above 46 in XLB as a clear risk-reward entry and says it is time to get into the sector.
Defense breakout offers good risk-reward.
Rather than picking one particular defense stock, Woods favors the defense sector through ITA, which has seen a major breakout; above 215 in ITA is a clear line of demarcation for a good risk-reward entry, and he thinks it is time to get into the sector.
Transports benefit from cheap oil catalyst.
Transport stocks are benefiting from cheap oil as a major catalyst; airlines are breaking out to new highs with strong travel numbers, and shippers such as FedEx and UPS are showing strong setups, supporting the broader transportation sector.
Airlines breaking out to new highs.
Airlines are all breaking out to new highs, supported by continued travel demand and great numbers, with cheap oil as a major catalyst.
FedEx broke key $300 resistance.
FedEx broke above the key $300 level, a significant technical resistance, and Woods says the long-term setup for the stock this year is phenomenal.
UPS keeps making new relative highs.
UPS, which Woods previously highlighted as a coattail rider, has done phenomenally since last quarter and continues to make relatively new highs over the last three months, with upside still to reverse.
