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I keep reading news that this stock market is over extended and we’re due for a major correction as if we didn’t have one just 12 months ago. It’s really hard to escape this trap, especially for a retail investor. People always find something why this market has to go everywhere but up, and if you present them some positive arguments, such as improving breadth worldwide, sentiment, not to mention record stock outflows among many others, they just disregard them.

In the previous post, Continuation of strength, I was focusing on the outperforming regions and sectors, those that continue to be in an up trend. Some are real beasts, such as health sector or $XLV ETF. In this one I’d like to present two value ideas that could start catching a bid after years of under-performance.

Without further ado, let’s get straight into it. The first idea I’d like to present is in metals and mining sector or the $XME ETF.

While the S&P 500 index has appreciated significantly since 2008, XME has remained depressed this whole time. It’s still down by 70% of its peak value. However, it looks ready for a cyclical up tick at the very least.

Next one is oil equipment and services industry within the energy sector, the ETF of interest is $IEZ.

Energy stocks have been beaten down even more than metals and mining stocks. They’re probably the most hated sector right now. Man, can you imagine the run up of these stocks if oil prices catch a bid (OPEC reduced their production lately) or if growth surprises to the upside going forward, something not many are expecting?

I prefer playing the relative strength game, so this might not be the easiest trade. However, there certainly are some very good looking stocks within the sectors that do offer good relative strength too! And especially those who think the market is over extended they should be all over these value stocks, right? Well, not sure about them, but they’re definitely on my radar.

ChartingTrades.com is a blog of CT Capital Ltd.

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