The market is trying to pull off one of the most-failed football plays in history, the forward lateral.
A forward lateral is when the quarterback throws the football to a teammate in a parallel direction (aka completely sideways).
It’s one of those trick plays you only see when the team is desperate for a win.
And we’re seeing the stock market attempting to make a lateral play right now.
Investors are moving laterally from sector to sector while the market is still in a bullish trend.
This constant flip-flopping between sectors says a lot about investor expectations, and it’s got me moving into two exchange-traded funds (ETF) that should thrive through the market’s summer slowdown.
We’re currently seeing a large exodus out of the technology sector, specifically large cap tech stocks, represented by the Invesco QQQ Trust (NASDAQ: QQQ) – which holds the top 100 NASDAQ stocks.
The high-flying valuations of Tesla (NASDAQ: TSLA), Facebook (NASDAQ: FB), Apple (NASDAQ: AAPL) and Google (NASDAQ: GOOG) turned into liabilities for many investors.
This change in sentiment is seen in the post-earnings selloff.
The fact that the earnings reports were good in most cases made them even more of a liability.
Especially because the next three months may prove a harder quarter for earnings growth.
We’re also seeing major outflows in the biotechnology sector.
It has fallen into the dreaded technical pattern of lower highs and lower lows, and the sector is woefully underperforming the broader market.
The reason for this pattern is simple.
Investors are trying to lock in their profits, and are selling at any highs – the reverse of buying the dip.
This is putting the entire biotech sector in a vulnerable position.
Over the last five years, biotech has been producing pharmaceuticals for every ailment under the sun.
But recently, we haven’t seen any headline drugs hitting the market, leading to an empty product pipeline.
Although biotech had outperformed the overall market through 2016-2020, the lack of products and diminishing patent protection now has investors running from this crowded sector.
I’m forecasting that the SPDR S&P Biotech ETF (NYSE: XBI) shares will slip into a bear market trend later this year as the shares fall below their 20-month moving average at $110.
Now that we’ve gone over the two sectors investors are running away from, let’s talk about the sectors that they’re currently flocking to.
My technical charts have identified a trading frenzy that’s centering around two specific industries.
What’s more, profiting from this market lateral is as simple as investing in two ETFs, right now.
These two ETFs will put you ahead of most investors as buyers begin migrating sectors…
CJ’s Lateral Play #1:
Buy SPDR S&P Retail ETF (NYSE: XRT) at market price
Sell XRT at $140
Our first lateral play is the most obvious one – the retail play.
XRT shares have seen a constant flow of assets moving into the sector over the last three months as investors prepare for what is going to be a robust recovery among these stocks, but there’s a catch.
Some of the largest names in the XRT are also some of the retail companies that are performing at a discount to the sector.
Wal-Mart (NYSE: WMT) for example. Shares of WMT are down more than 1% year-to-date, despite the XRT shares trading 45% higher for the same period. These examples are few and far between, but they’re present. Don’t let them scare you away from the XRT shares because for every WMT there is a Dillards (DDS) that is trading more than 125% higher for the year.
The re-opening is just starting to get into full swing in the retail sector making it an odds-on favorite to outperform the large cap technology stocks.
I’m in the process of adding XRT shares to my portfolios at the current price of $95 with a target price of $140 by year-end.
CJ’s Lateral Play #2:
Buy U.S. Global Jets ETF (NYSE: JETS) at market price
Sell JETS at $35
Our second lateral play is in the airline sector, represented by the JETS ETF.
JETS invests in, well, the airline industry. Southwest (NYSE: LUV), American Airlines (NASDAQ: AAL), and United Airlines (Nasdaq: UAL) are the top three holdings of this ETF that has returned only 18% year-to-date.
I say only, because that’s far less than the returns that some of the other “recovery” sectors have posted for the same period, but I like that, here’s why.
The airliners have been fighting a headline game with the pandemic as resurgences of the COVID-19 infections around the world have kept these stocks in a holding pattern.
So, what’s changed?
Over the last two weeks we’ve seen booking increase – dramatically – as travelers are gearing-up for a busy travel season. The recent changes to mask mandates and guidance by the CDC and many states are acting as confirmation that this time, the rally in the airline companies is not a test and they’re ready for takeoff.
Cruise liners and destination locations will be the last pieces of the travel puzzle to fall into place, at which time you’ll want to be positioned for the takeoff that should fuel a rally in the JETS shares through the second half of 2021.
I’m adding the ETF to my portfolio at current prices with a target of $35
Thanks to the pandemic reopening, I’m seeing a lot of new profit opportunities that we have never seen before.
Remember, this is the very first pandemic reopening humanity has ever faced, and I’m seeing a lot of lucrative trends we can take advantage of.
So be on the lookout for my next edition of Straight-Up Profits.
Until next time,
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Source: Straight Up Profits