Month: July 2013

When it comes to energy (and not only), I let the market (price action) does the thinking for me. It is not news for anyone that solar stocks ($TAN) have recently had a major comeback and are one of the best performing industries in 2013. They are not the only energy industry that has done well.

The Wind ETF $FAN is up 40% YTD and most of its gain occurred in the past three weeks.

Nuclear stocks have gone atomic this week with 100% moves in $USU and $URRE.

Despite expectations for a slowdown in the emerging markets economies, crude oil has cleared $100 and stayed there.

Coal and natural gas are the only dogs in the energy space.

I wonder what is the market trying to discount here. Typically, commodities start to outperform in the last stage of the recovery cycle, when inflation begins to rise. The latest inflation readings have been tepid, but market is usually forward-looking and discount 6 to 12 months into the future. It is not always correct, but we should always pay attention to what it is doing.

The beauty of prolonged market uptrends is declining correlation. It is a “market of stocks” environment, where corrections take the form of sector rotation. While one leading sector is taking a breath from a recent spike, another that has been consolidating takes the lead and breaks out.

Quite a few railroad stocks have been quietly building new bases over the past couple months and the renewed strength in the overall market might be the catalyst that helps them to break out to new multi-year highs. Don’t forget that we are also in the midst of an earnings season. Quarterly reports will play a significant role and could be the proverbial tipping points that start, accelerate or end an existing trend.

Take a look at these three setups in the railroad industry: