Markets are poised for a small gap up this morning as I write this, but yesterday the DOW made a new high while the Nasdaq actually finished the day in the red. If you look at the stocks that made up the DOW 30 once again banks were among the top gainers, while big cap tech stocks AAPL and MSFT closed down despite the big market rally with the DOW gaining over 400 points. The fact of the matter is that many of the big cap tech stocks and fad plays remain with broken stock patterns despite the stock market rally of the past few days. You can see this in the chart of the ARKK ETF, which specials in these type of stocks and has Tesla as its top holding.
ARKK remains stuck below its February low and its 50-day moving average. However, it fell fast enough and hard enough that it got deeply oversold, is bouncing, and is most likely to now drift sideways in a range. That’s the story with the Nasdaq 100 and so many fad plays now. However, some select sectors can still go up and the DOW is likely to remain strong in the face of continued relative weakness in the big cap plays. Whether this is a simple great rotation or the makings of a mega topping process remains to be seen, but one thing is sure, specialized sectors and stocks are simply going to beat the performance of the Nasdaq 100 now going forward.
Energy is an obvious winning play, but one related sector that is now poised to soar are the shipping stocks, which benefit from a growing global economy and rising energy prices. The global economy is going to grow this year. On Tuesday the Organization for Economic Cooperation and Development came out with projections for the global economy to grow at 5.6% this year after having declined by 3.4% last year. They are looking for the biggest growth rates to come now from the United States and Turkey, with expectations for 6.5% 2021 GDP in the former.
The Federal Reserve will release first quarter GDP estimates in April, but already, internally, the Federal Reserve Bank of Atlanta is currently projecting an 8.4% GDP growth for the first quarter. These type of growth rates mean inflation is coming.
This is why we have seen secular lows in commodities and interest rates made in the past twelve months. It is also another reason why the shipping stocks are poised to rally big from here. I first mentioned them as a sector to buy on February 12, 2021 in a post. I’m not a perfect trader as I sold out of these stocks and took profits last week as I was worried about the potential for short-term market declines and they were the last thing I had bought at the time, but I jumped back in yesterday afternoon as its a sector I simply don’t want to be left behind in. The stocks pay nice dividends and the sector tends to soar when it is in a bullish cycle.
Check out these four stocks that I own:
Three of these stocks have broken out. TK hasn’t broken out yet, so it still provides a nice entry point here and one could buy and put a stop loss below $3.20 on it. I’d bet money that these four stocks will outperform the ARKK fund and its holdings going forward from here. Actually, I am betting on that as I am short a few of the stocks in ARKK! Remember I’m operating a bit like a hedge fund now with both short and long positions in my accounts.
If you have any thoughts scroll down to the comments section and share them and don’t hesistate to ask questions either!
-Mike
