Chart Breakout Calls: Oil, Financial, Industrial (USO, XLF, XLI, GE, COF, BWA)

Chart breakouts are happening as the market recovers.  Maybe.  Monday’s triple digit DJIA gains on the first day of the month followed an extremely strong July.  You just have to keep in mind that the end of April through the end of June looked like a downward staircase.  Many of the key sectors still have plenty of room to recover before they get anywhere close to 52-week highs.

Our technical analysis affiliate, Adam Hewison of INO, has a quick audio-video chart analysis that has some conflicting data but showing that oil could rise back to $88.00 per barrel or so.  United States Oil (NYSE: USO) is always the one to watch when it comes to tracking oil, although we’d throw up the caveat that there can be significant tracking error in this one with more volatility and pricing shenanigans around each monthly roll-dates.

Reuters has some quantitative data showing chart breakout possibilities in two key ETFs: Financial Select Sector SPDR (NYSE: XLF) and Industrial Select Sector SPDR (NYSE: XLI).  After Reuters touted the financial and industrial ETFs, Mike Tarsala specifically noted some proprietary Reuters data showing breakout patterns and alerts in Capital One Financial Corp. (NYSE: COF), BorgWarner Inc. (NYSE: BWA), and others.

The same can be argued in conglomerates for chart breakouts.  General Electric Co. (NYSE: GE) hit a high yesterday and today since June 3, 2010.  This is only two trading days old, but conglomerates have been exceeding the market so far this year and many had a better July than the broad market.  Analysts still have significant upside to their price target objectives in all of the conglomerate stocks.

Charts are very important and should not be ignored.  Just keep in mind that they are just one tool.  Every time there is a black swan or outlier event you hear pure technicians say, “There is no way the charts could have priced that in.”  Unfortunately, pure technical analysis is supposed to do just that.

We are also seeing mixed to soft market trading on Tuesday just a day after the breakouts took hold.  All of this is ahead of Friday’s key unemployment data that is likely to be a market-moving event.

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JON C. OGG