On August 2nd I wrote here (http://www.investorplace.com/53951/trade-of-the-day-industrial-select-sector-spdr-nyse-xli/) that the industrial stocks are setting up for a short-side opportunity as they had broken a major uptrend a couple of days prior. The vehicle discussed was the Sector SPDR Industrial ETF (ARCA:XLI) which has since then fallen roughly 14% and yesterday reached our profit target at $31. The target at $31 was the measured move of the head and shoulders pattern in place.
The weekly chart is beyond broken and given the near-term significantly oversold levels just about everywhere we look a trade to the upside may now be setting up. Given the major break on the weekly charts however it is important to note that I think the SPDR Industrial ETF (ARCA:XLI) will eventually have lower to fall still.
In the near-term however looking at the massive 16% sell-off in just eleven trading days a fairly quick rally of around 10% in the SPDR Industrial ETF (ARCA:XLI) is not out of the question.
If we look at the daily chart and zoom in on the sell-off from July 22 to yesterday, then a 50% retracement would take us to roughly $33.50.
An entry point at $29.50 with a stop around $28.50 and a target near $33 is what I see as a decent trade idea here. I must reiterate however that all the major stock indices have broken their daily and weekly charts and selling the rallies is now the game.