These Sectors are Going to be Destroyed During Week 9
On Thursday, I explained that we’re heading into the most dangerous weeks of the year for the market: Week 9.
Nobody knows for sure why it happens.
Regardless, we know that the S&P 500 drops an average of 1% each year during Week 9.
So, where do you go to position yourself for trading the Week-9 anomaly?
Well, here are three ETFs and three stocks that are sure to be ravaged during Week 9…
I used several factors when considering this list, after all, I refuse to just throw sh*t at the wall and see what sticks.
But there are three sectors that are most likely to take a hit during the anomaly we call Week 9.
Before I give those to you, I want to explain my process for finding these stocks.
First, even though the seasonality data we use typically takes a look at the last 20 years, today’s market is much different than the market we traded back in 2003.
So, to combat the ever-changing organism we call the market, I tightened the reins a bit and went with five years’ worth of data.
The next bit of criteria a stock needed to meet were high Alpha and high beta.
I know the Greeks can sound a bit like… well, Greek to most people. So, what that means is the ETF or stock needs to well outperform the market. That’s Alpha, in short.
But also, the ETF or stock needs to be more volatile than the market; that’s the Beta in the equation. For what it’s worth, there is one stock on today’s list that breaks this rule, but I’ll explain that when we get to it.
At-Risk Sector #1
Semiconductors
This sector has been bouncing higher and higher since the end of last year.
the market’s going to dip in Week 9 so you’ll see selling pressure.
You can trade this sector using the SPDR S&P Semiconductor ETF (XSD):
As you can see, this stock’s started the party already, and it is going to get even worse as people start to protect the profits they’ve made so far this year.
Now, if you want to go for the riskier play and find a stock in this sector that you can get some real profits in the short term, check out Advanced Micro Devices, Inc. (AMD):
I was on the fence with this pick, if I am being honest. Marvell Technologies Inc (MRVL) also caught my eye.
But with a break below the 200-day moving average (MA200) and this stock being the relative strength laggard of the sector, it pushed me over the edge.
Look to trade AMD to a target price of $72.50, right below the bottom Bollinger Band.
At-Risk Sector #2
Clean Energy
Now, this one might be re-opening a wound if you are a member of my Night Trader service.
It’s no secret we don’t win all of our trades, and two years ago, we were long the clean energy sector. Then, Week 9 hit, and we took a sizable hit because of it.
You can track this sector using the IShares Global Clean Energy ETF (ICLN):
In the last three years, this ETF has been destroyed during this infamous week.
It may not see a huge dollar amount drop, but remember, it’s under $20 – so even a $1 drop can be substantial for a position like this. I’m looking for it to hit $18.
And of course, for those of you with a higher risk tolerance, take a closer look at SunPower Corporation (SPWR):
The drop on this one is likely to be larger than the ETF it’s in.
There is a 50-day moving average (MA50) and 20-day moving average (MA20) that are trending lower, and it just broke the bottom Bollinger Band.
Look for this to hit a target of $12.
At Risk Sector #3
Biotech
This sector has been bouncing around a little higher at a time, and it’s finally starting to break out of its bullish trend.
You can keep an eye on this sector using the SPDR S&P Biotech ETF (XBI):
You’re likely to see another 6% drop in this ETF over the next week.
I’m looking at a target of $78, matching its recent lows before the ETF finds support.
And to round it all out the last stock on my list that happens to fall into the biotech sector is going to be AbbVie Inc (ABBV):
This is the one that I said breaks the high Beta rule I mentioned earlier. It’s a pretty smooth-moving stock.
Given that there is not a lot of volatility in this stock, that is where experience in the market comes into play.
The big boys of the market – stocks with a lot of open interest and volume — will absolutely be a fruitful short-term investment during Week 9.
Look for this stock to take a dive to its recent lows, likely yielding a $145 print.
Enjoy the rest of your weekend. On Monday morning we’ll dive deeper into sectors we can profit from next week.
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February 25 2023
