XLF – Financial Select Sector SPDR Fund

Today, the 25th of March 2019, we will be analyzing the recent performance of the Financial Select Sector SPDR Fund (XLF) and the Technology Select Sector SPDR Fund (XLK).

Based on our correlation-confirmation model, the positive correlation between the XLF and the XLK is very strong (85%). There is a particular reason why we are currently looking at these two ETFs.
The XLF offers an extremely liquid exposure to the heavyweights in the US financials segment. Its cap-weighted S&P 500-only portfolio means that the fund is concentrated in large banks and other financial institutions, and avoids small-cap stocks.

Furthermore, the XLF is large and massively liquid, by far outpacing its peers in trading volume and at the same time it offers a package of very low costs related to it.

In fact, for many investors and traders the XLF is by far the most preferred ETF for financial exposure.

As we have stated in our previous analyses, trading with ETFs could be a very profitable business especially for retail investors who lack the required experience and knowledge to do the analysis themselves. In other words, instead of having to choose individual companies and analyzing them, retail traders and investors could pick up an ETF where the professionals running the ETF would be analyzing the stocks for them and picking the stocks that are expected to perform well over a period of time (short or longer term).

We at Dow Experts provide our followers with an in-depth analysis about the most attractive trading opportunities out there and combine fundamental and technical factors that play a key role in all our overall analysis that give a chance to our traders to take advantage of and make high profits on the market by following our professional guidance and analysis.

Going back to our previous point about why the financial sector in the US has been attractive lately, we need to mention the very important factor – interest rates. All banks and financial institutions are very much dependent on whether interest rates are going up or down. In fact, when interest rates go up, financial institutions make more money. Why is that? Well, because the main source of revenue for banks and other institutions are their lending activities. In other words, banks make money out of the difference between the interest they get from their lending activities (loans and credits), and the interest they pay to the customers who made a deposit with the bank.

Thus, when the Federal Reserve (FED) raises interest rates the banks are given an opportunity to increase the spread (the difference) on the interest between loans and deposits; and that way they are able to generate higher revenues and of course higher profits for their shareholders.

The XLF has done a great job since the end of 2016. There were two key reasons for that to happen. The first one is that the whole US economy has done a great job since then. It kept on growing and creating more jobs; while the unemployment rate has gone down to only 3.5% and is currently standing at record lows.

Yet, the main reason for the huge growth of the financial sector in particular is the because the Federal Reserve started raising interest rates in 2017 and boosting banks and other financial institutions’ stocks. The interest rate was 0.5% in 2016 and the FED started hiking rates by 0.25%. So, since 2017 the interest rates have grown from 0.5% to 2.5% in 2019, which has been extremely beneficial and profitable for the financial sector.

Therefore, traders following our previous analyses on the leading stocks within the financial sector have been generating high profits during that period of time.

Furthermore, the XLF is an extremely important ETF that should be followed by traders and investors for another very important reason. The financial sector plays a key role for the overall performance of an economy. The situation around interest rates is vital for an economy because when interest rates are low banks lend more money and therefore business get more loans that they invest in new projects afterwards and that helps the economy grow and creates more jobs, building people’s wealth.

When interest rates are high, it becomes more expensive for businesses and individuals to borrow money and that could be a key reason for an economy to start slowing down.


This being said, together with the strong economic situation in the US we have been seeing lately, we believe the financial sector will keep on rising at least in the short to middle term and lots of profits would be made to the upside on the major banking stocks out there.

The Banking services account for 50% of the XLF, followed by Insurance (32%) & Investment Banking (18%).

On the other hand, the XLK is an extremely important ETF to follow as well because it represents the performance of the most attractive sector in the US economy – technology.

Some of the biggest tech stocks out there, such as Apple, Microsoft, Visa & Intel are all included in the ETF. The constant innovation that these companies are able to come up with it is a key factor in their overall stock performance. The leading technology stocks out there are always part of the biggest investors and traders’ portfolio because their stocks have been outperforming the market lately and therefore have been maximizing investors’ returns.


From a technical standpoint, the XLF has done a great job so far in 2019. We have seen it bounce from the lows at $22 in December 2018 to reach the highs at $27, followed by a short-term correction towards the current $25. Yet, we believe this was only a short-term profit taking correction that has recently occurred and are seeing this correction as a great buying opportunity. In fact, we are currently expecting the upcoming 1st quarter earnings reports by the leading banks and other financial institutions in the next few weeks. As we already mentioned above, the US economy has done a great job lately and by looking at the previous quarters in 2018, we believe the biggest financial companies will deliver another strong quarter now that would immediately send their stock prices higher in the short-term afterwards.

Chart: XLF

Furthermore, the price is currently testing a key support mark at $25, which is expected to hold as well. By looking at the daily chart, our followers could easily see that this same support line was tested after a strong selling pressure took place in the end of October 2018 and sellers failed to break the price below that level and it found lots of buying pressure at that point, which then sent the price 10% to reach the $27.50 mark in less than 10 days.

So, we believe more buying pressure will take place at that point now which will then lead to a strong upside movement. Moreover, the technical indicators are very oversold already – the RSI is at 30, while the Moving Average Convergence Divergence (MACD) indicator is crossing up in the oversold territory already and the lower Bollinger band mark is matching with the strong support line at $25, giving further bullish indications to follow up on.

*We will start buying the XLF at the current strong support at $25. We believe that strong support mark will hold and sellers will find it hard to break that level to the downside, while lots of bullish momentum is expected at that point where buyers will take advantage of the recent correction that has occurred and start buying, which will have an immediate upside effect on the price. Our initial take-profit target stays at $27.50-$28 where we will cash in half of our profits, while the second target stays at $29-$30 where we will be fully collecting our profits.

XLK – Technology Select Sector SPDR Fund

The stock market in the US has been extremely bullish so far in 2019. The XLK (Technology Select Sector SPDR Fund) started the year at $58 to reach the highs at $75 a few days ago. Traders need to know that the leading technology stocks, such as Apple, Microsoft, Visa and Intel are all included in the XLK and their performance is of vital importance to the overall performance of the ETF. Following these companies’ results lately we shouldn’t be surprised why the XLK has been so bullish so far in 2019. Well, all these companies have been delivering great financial results over the past few quarters and have been beating analysts’ expectations. The biggest companies within the ETF are Apple and Microsoft and each of them accounts for 19% of the total holdings the fund has. Both of these companies have been reporting better results than what analysts had expected in the past few quarters and that has been extremely bullish for their share prices and of course for the XLK itself.

Apple for example has been extremely innovative in the past few years and has kept on coming up with new products, such as new iPhone models, MacBook computers, AirPods, iPads and Apple watches. The company has got a great deal of loyal clients that can’t wait for the new Apple products to be released, which always happens in September. For educational purposes, we would like to tell our clients that every time Apple announces the new iPhone and other products, the share price bounces around $10 on the same day! So, when it comes to trading Apple during the event when they would announce their new products, we would like to recommend our traders to follow our thorough analysis on the stock in order to maximize their profit potential.

Going back to the XLF, the price has made a bit of a profit-taking correction in the past few days and dropped from the $75 it reached on the 20th of March to the current $72 mark.
The movement on the chart is clear – there has only been some profit-taking interest taking place lately and considering the strong financial performance of the technology sector, we believe there is no other reason for the price to drop besides the traders’ interest for cashing in some profits after the strong bullish momentum we have seen on the price in the first quarter of 2019. In other words, there is a clear uptrend going on the chart and we believe these short-term corrections give us a great chance for buying low and making high profits to the upside when the price starts bouncing back up shortly. Actually, there is also a strong support mark laying at the current $72 mark where lots of buying pressure has taken place in the past and bears have been failing to break that level to the downside.

Furthermore, the price is currently matching with the middle Bollinger band line, which also stands at the $72 mark, giving further bullish indications.
In fact, based on our correlation-confirmation model, there has been a clear uptrend going on the XLK and the recent correction that has occurred is only a profit-taking interest among traders which is currently giving us a chance to start buying and follow the longer-term bullish trend. This is also confirmed by the performance of the XLF and the charts look very much alike; a strong bullish trend going for the past 3 months, followed by a short-term profit-taking correction that currently gives us a chance to buy low and make high profits to the upside, following the strong uptrend that has occurred so far in 2019.

Chart: XLK

*Based on our fundamental and technical analysis, we believe the XLK will continue its strong uptrend at least for the next few months. Therefore, the short-term profit-taking correction that has recently occurred is giving us a great chance for buying it at a discount and therefore be able to maximize our profit potential to the upside.

We will start buying at the current levels around $72-$72.50. Our initial take-profit target is set at $76 where we will be looking to cash in some of our profits, while we will be waiting for the next target at $79-$80 to fully collect our remaining profits.
Should the price then make a correction towards around $74-$75 we will start buying again and keep our buy positions until it reaches the highs at $81-$82 where we will be closing our positions and be able to maximize our profit potential on these two movements, while waiting for some more profit-taking opportunities which will give us a chance to make even more money to the upside.

Microsoft

Microsoft is a leading American multinational technology company. It develops, manufactures, licenses, supports and sells computer software, consumer electronics, personal computers and other leading products on the current advanced technological market. Since Bill Gates and Paul Allen founded Microsoft back in 1975 it has been growing tremendously to become a global leader in the technological sector.

Microsoft plays a big role in the XLK (Technology Select Sector SPDR Fund) and accounts for above 19% of its overall weight together with Apple’s 19% as well.

So, the company’s performance is vital for the XLK and that is the main reason we have chosen this stock for our next stock-pick today (25th of March 2019).

In our analysis on the XLK today, we have shown our followers that the XLK has done a great job so far in 2019, followed by the strong financial performance the leading technology companies have been delivering in the past few quarters. As we have stated already, Microsoft reported $1.1 per share in the 4th quarter of 2018 vs. the $1.09 expected, followed by $1.14 per share vs. $1 expected in the Q1 of 2019 and showed investors that there is a continuous improvement in its overall financial performance which of course has been leading to strong bullish rallies on the stock and therefore very high profits for its shareholders and traders.

Table: Microsoft’s revenue

Source: FT

As it could be seen on the table above, Microsoft has kept on growing its revenue for 4 consecutive years now and that has been a key factor in delivering a great value for its shareholders and building their wealth. The net income has also been rising during that period of time and the company has been increasing its dividend (currently yielding close to 2%), which is another very positive factor that shows the company is growing and we can expect the share price to keep rising in the future.

Looking further into the financial statements, we must say that Microsoft’s net profit margin is 30% and it has got a RoA (Return on assets) of 14%, RoE (Return on equity) of over 40% and RoI (Return on investment) of 19%. These figures are extremely impressive and can hardly be seen among even other leading companies around the world.

Talking about fundamentals, the company has done a great job over the past few years.
Now lets have a look at the technical part of our analysis and see if the chart and indicators confirm our bullish expectations on the stock for the next few weeks and months.

The chart clearly shows that the stock has performed very well so far in 2019. It started the year at $97 and has so far managed to reach the highs at $120 in only 3 months. This represents above 20% return on the stock in the first quarter of this year. So, the strong financial performance of the company has immediately reflected on its share price and that has been the main reason for its strong bullish rally lately.

A 20% increase in less than 3 months is quite a big movement for a stock. Therefore, it was only natural to see a profit-taking correction among traders who bought at the lows around $100 a share. This is exactly what happened. The stock has fallen around $4 lately to reach the current levels at $116. Yet, it has been struggling to go below that mark and there is a very specific reason for that – it failed to break the key support level at that point which has been bringing lots of buying pressure in the past. We can also see that as soon as the price reached that level, the selling volume and activity decreased substantially and the daily candles on the chart closed above that strong support line. Moreover, the middle Bollinger band line matches with the strong support at that point and is giving further bullish indications. In fact, this is a clear representation of a strong uptrend – strong bullish rallies with very short-term profit-taking corrections where bulls take advantage of a recent discount on the price in order to start buying again and follow the strong uptrend and push the price higher in the future.
By looking at the technical side of things, it is clear that Microsoft’s stock should continue its strong uptrend in the next few weeks and months and we will take advantage of it in order to maximize our profits to the upside.

Based on our correlation-confirmation model, Microsoft’s movement is confirmed by the performance of the XLK and the XLF which are both showing a clear uptrend going on their charts, followed by a short-term profit-taking correction where traders are currently expected to add more to their long positions and push the price higher in the middle to short-term.

Chart: Microsoft


*We will start buying at the current support mark at $116. Our initial profit-taking area is at $125, which shouldn’t be a problem for the stock to reach in the next few weeks, followed by our longer-term target that is set at $130. Should then the price make a profit-taking correction back towards $125-$124 we will be looking to open more buying positions at that point. We will be adding some more to our buy positions in case there is a further drop towards $120 so we can get a better average price and therefore be able to maximize our profits further to the upside. In terms of profit targets to the upside, we will again be looking to cash in profits around the $130 mark where we will be fully closing our buy positions.

Intel Corporation

Intel Corporation is an American technology company, founded back in 1968 in California.
The company has always been among the leaders in the sector of producing central processing units, microprocessors, integrated graphics processing units, motherboard chipsets, modems, Wi-Fi and Bluetooth chipsets, flash memory and others.

In fact, Intel is the world’s second highest valued semiconductor chip manufacturer based on revenue after Samsung Electronics.

Intel plays an important role within the XLK (Technology Select Sector SPDR Fund) with its current weight of 4.5%. It is the 4th biggest holding of the ETF after Apple (19%), Microsoft (19%) & Visa (5.4%).

That is the reason why the DowExperts have decided to choose Intel for our 2nd stock pick for today, the 25th of March 2019.

We at DowExperts always include both fundamental and technical analysis in our research because based on our trading and investment philosophy both analyses are vital for our followers’ success on the market. In other words, being able to analyze the financial statements of a company and read the information properly so that it helps an investor make rational investment decisions is the key to being successful on the financial markets.
Moreover, being able to combine that with the importance of technical analysis and analyze the chart, trend lines, historical price movements and technical indicators is of vital importance as well for being able to maximize one’s profits on the market on a daily basis. That’s why the DowExperts use a combination of the two analyses in order to help our followers read and most importantly understand the information in a proper manner which will then help them make rational investment decisions and be able to maximize their investment results.


First of all, let’s look at Intel’s financial statements. The company has done a tremendous job in the past 4 years since 2014. As we mentioned earlier, it is currently the world’s second largest semiconductor chip manufacturer based on revenue after being overtaken by Samsung. So, let’s have a look at the company’s revenue performance for the past 4 years.

Table: Intel Revenue

Source: FT

As it could be clearly seen on the picture above, Intel has kept on growing its revenues in the past 4 years and that has been based on its great financial performance and the right management decisions when it comes to spending money on a proper research and development (R&D) strategy and investing in new projects which have then been bringing higher revenues for the company. Moreover, the company’s net income has been very solid during the same period of time and the company has been paying a dividend for its shareholders, which has been rising over the past 4 years as well. The decision by the company to raise the dividend is a very positive factor that shows the management is positive about the overall performance of the company and believes the company will continue growing in the future. Therefore, they raise the dividend so they can attract more potential investors to buy their stock and of course that would lead to more bullish movements on the price in the future.

Table: Intel dividends

Source: FT

Furthermore, we at DowExperts like to look at the company’s accounting and investment ratios when it comes to evaluating its overall performance. In fact, Intel has shown a very impressive performance with its gross margin of 59%, net profit margin of 27% & operating margin of 30%.

Moreover, the investment ratios show a tremendous performance as well. The company has returned 15% on its assets (RoA), while the RoE (return on equity) is 27%, followed by the RoI (return on investment) of 18%.
The company’s book value per share is 17, meaning that the current stock price is trading only 3 times its book value which means there is a lot more room for growth to the upside.

It is also important to mention that the company has managed to reach all these results in the past 4 years without having to borrow more money or growing its debt. In fact, the debt-to-equity ratio is only 0.38, meaning the company is keeping debt low and is growing organically by reinvesting its own net profit after paying dividends to its shareholders. This is another extremely positive factor when it comes to a company’s long-term performance on the market.

By looking at the chart and the technical side of things, we shall say that the company has also done a great job so far in 2019, which confirms the strong movement of the XLK during that period of time. The stock price has so far managed to bounce from the lows at $44 to reach the $55 highs a few days ago. This represents a 25% return in only 3 months since the beginning of the year. We have then seen a bit of a profit-taking interest among traders that led to the price reaching the current levels at $52.50. We should say that there is no other fundamental or technical reason for that little correction on the price besides the profit-taking correction to the downside. We need to also consider the fact that the price is currently testing the diagonal support line at that point that is drawn by the black line on the chart below and it clearly shows that the price is struggling to go below that level. Furthermore, the lower Bollinger band line matches with that strong support, while the Stochastics indicator is crossing up, giving further bullish indications.

With all that in consideration, we must say that further downside movements seem extremely limited and we are expecting to see another strong bullish rally on Intel’s stock in the next few weeks.

Chart: Intel Corporation

*We will start buying at the current support mark at $52-$52.50 as we don’t expect a further downside movement to take place at the current levels.
If the price drops another $1-$2 to the downside we will be able to buy some more of the stock and get a better average price which will then give us a chance to make even higher profits to the upside.

Our first take-profit target is set at $56 where we will cash in half of our profits and wait until the price reaches our longer-term target at $59-$60 where we will be closing all our positions and taking our profits. We must suggest that there is a strong resistance at around $59 and we wouldn’t be keeping the position further afterwards as there might be lots of take-profit interest at that point which could easily lead to a downside reversal on the stock after it reaches that level.

JP Morgan Chase

JP Morgan Chase & Co. is one of the leading American multinational investment banks, headquartered in New York City. S&P Global has ranked JP Morgan as the largest bank in the United States and the sixth largest bank in the world measured by total assets.
Moreover, JP Morgan is currently the largest bank in the world by market capitalization with its $300 billion in valuation (see chart below).

In other words, the strong financial performance of the bank in the past 10 years after the crisis have impressed traders and investors who have been buying the stock and have pushed the share price towards its all-time highs at $120 in the 3rd quarter of 2018 after the stock was trading at $88 a year earlier (36% increase). When it comes to trading banks, one should be aware of the main fundamental driver behind the great bullish movements that has occurred on the biggest US banks’ stocks – the rising interest rates in the US since the beginning of 2017. The interest rate in the US back then was only 0.25% and the Federal Reserve started hiking rates, bringing it to the 2.50% mark in the beginning of 2019. That in turn has been extremely favourable for the financial sector in general and of course banks in particular. Why is that? How does it affect the banks and their overall performance? Well, it is well aware that the banks’ main income comes from their lending activities. In other words, it comes from the interest they receive for the money they lend to individuals and businesses. When the interest rates increase banks start increasing the interest they charge their clients for borrowing money and reinvesting for new projects when it comes to corporations, and of course individuals who borrow money from the banks in order to finance their mortgage and buy properties for example.

While it is more expensive for individuals and corporations to borrow money from the banks when interest rates go up, this is extremely profitable for the banks as they make more money for their shareholders who then are attracted by that and buy the stock, which immediately brings the share price higher.


By looking at JP Morgan’s financial statements we could say that the Bank has performed very well in the past 5 years and has kept on increasing its revenue by between 10% and 20% between 2015 and 2018. It is obvious that after 2017 the Bank has shown a tremendous growth in its revenue based on the higher interest rates environment in the US as we stated earlier. The net profit of the Bank has also been showing a steady increase of around between 6% and 10% over the past 5 years. Traders and investors have also liked the company because it pays a dividend that has yielded an average of 2.40% during the same period of time.

By looking at the financial ratios of the Bank, we have been very impressed by its operating margin of 39% (versus the industry’s average of only 26%), followed by its net profit margin of 31% versus the industry average of only 20%. Moreover, the company has got a book value per share of 83, outperforming the industry’s 69. JP Morgan has shown a return on equity of 15%, while its competitors have averaged below 11% over the past few years.

To sum up, we must say that the financials of the company has shown a continuous growth over the past few years and the Bank has been the top performer within the financial sector. When there is money to be made, the DowExperts are always there to seek these opportunities and maximize their followers’ profits on the market.

When it comes to its share price performance, JP Morgan’s stock has grown by 66% between 2016 and 2017 and another 33% by the beginning of 2018.

In fact, the stock has surpassed by far the average stock market performance that has shown around 10% growth a year over the past 100 years. In other words, it has been a great money generator in the past few years and that is the reason why we are analyzing its performance today, the 25th of March 2019. By looking at the performance of the stock since the beginning of 2019, we shall say that the year started pretty good for the stock and it has grown from $99 in the beginning of January to reach the $108 mark which was hit 5 days ago. Since then, there has been a short-term profit-taking interest among traders that led to a small correction on the price, sending the stock towards the current levels at $98.

Since the beginning of the year the stock market has been very bullish and this could easily be seen by the XLF (Financial Select Sector SPDR Fund) and it is confirmed by JP Morgan’s overall stock price performance. The charts of the two actually look very similar which is widely expected, considering the fact that JP Morgan accounts for 12% of XLF’s overall holdings, led by the greatest investor of all time Warren Buffett and his Berkshire Hathaway (13% weight within the XLF). There is a clear uptrend going on both XLF and JP Morgan and this is confirmed by the technical indicators. Currently, the main indicators, such as the Relative Strength Index (RSI) and the Stochastics indicator have gone close to the oversold territory because of the recent correction on the stock and have already started crossing up, giving buying indications. Moreover, the lower Bollinger band line touches the strong support at $98 while the price is showing a clear weakness and a lack of further selling activity taking place at the current levels. All of the above-mentioned indications signal for a very likely upside reversal, which should take place in the middle to short term. In other words, the recent correction that has taken place on the chart is giving us a great entry level for our buy positions which will give a chance for our followers to maximize their profit potential to the upside. We should also mention that the company is going to announce its 1st quarter earnings report in April and the expectations are very positive. In fact, we believe the company has continued growing its revenues and net profit and that would reflect positively on its earnings for the past 3 months where in case of a better report than expected the share price will rise strongly in the short-term after the event and that would give a chance for our followers to make a lot of money to the upside.

Chart: JP Morgan Chase

*We will start buying the stock at the current price at $98. Should the price manage to break the current support and make a further downside movement we will buy again at the next support level at $95. Our initial take-profit target stays at $110 where we will cash in half of our profits, followed by the next profit target at $115 where we will be fully closing our buy positions and collecting profits.

If the price then makes a profit-taking correction down towards the key support mark at $105 we will be looking to open more buy positions at that level with a take-profit target staying again at $115 below the key resistance mark at $117-$118 where lots of taking profit interest has occurred lately and it is very likely that the price will reverse back to the downside after reaching that level.

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