The ETF market can seem oversaturated these days with a fund for almost anything you can imagine. For technicians, this is pure gold as we’re able to easily monitor the collective price action of the most niche areas of the market.
One exercise I like to do to take advantage of all these ETFs is plot various issues against one another to identify relative strength and weakness among factors, geographic regions, subsectors and smaller market segments.
Here are some examples of pairs I look at in the thematic space:
Electric Vehicles relative to Traditional Automakers ($KARS/$CARZ)
Genomics companies relative to Biotech ($ARKG/$IBB)
Fintech stocks relative to Financials ($FINX/$XLF)
Mobile Payments relative to Banks ($IPAY/$KBE)
One common theme you will find by looking at enough of these ratio charts is that the innovators in each Sector are often outperforming.
The Chart of the Week illustrates this concept well, showing Online Retailers ($IBUY) resolving higher within the context of a structural uptrend, not only on an absolute basis but also relative to Big Box/ Traditional Retailers ($XRT).
IBUY’s absolute daily chart is in the top pane. After coiling in an ascending triangle since February, this week price broke above former support, turned resistance. It now looks poised to retest record highs near $54. In the bottom pane you can see the long-term outperformance relative to XRT, as price recently made new ATH’s and is now consolidating above prior resistance.
This chart is a good reminder that there are often pockets of strength even in the weakest areas of the market, like Retail… you just have to find them.