How to Play the Euro Crisis & Capture the Seasonal Effect


It may not feel like the time to deploy any strategy in the market other than run & hide, but at least one pro isn't backing off due to the ongoing EU debt crisis.

In fact, Rob Sluymer, a technical analyst at RBC Capital, is pursuing an "intermediate term opportunity" (3-6 months) with a distinct "seasonal bias." He says we're still early in the recent trend of cyclical leadership and that Industrials, Materials, Energy, Technology and even some Financials are going to continue to work higher.

Rather than waiting for a stock to hit a 52-week high, Sluymer searches for budding leadership on a shorter-term basis, and looks for relative outperformance over a few weeks or a few months. Within those movers, he says there are two distinct types of profiles he see in the market: Leadership names and down & dirty names.

Within Industrials, Sluymer says stocks like Cummins (CMI) are worth owning through year-end and into the first quarter, and will work for the seasonal effect.

Sluymer says he's tracking a "real interesting technical event happening in technology." He's says the Tech sector "sat out of the bull cycle from 2003 to 2007," and is finally waking up again after a decade of digesting the over-investment and over-capacity of the dot-com bubble.

"Qualcomm (QCOM) to me is right in the sweet spot and just starting to emerge" Sluymer says in the attached video. "I think there is significant upside to go from here."

Data storage equipment maker EMC (EMC) shares a similar new leadership profile, as does FMC Technology (FTI) within the Energy Sector.

On the down and dirty/oversold front, Sluymer is very positive on U.S. Steel (X), which he calls a perfect example. "It's back to where it was in 2008, so downside looks very limited," he says, adding that "the risk-reward is very attractive."

Rounding out his seasonal bounce basket is Sluymer's call to lighten up on defensives, which continue to show "evidence of slowing" and their relative performance is now "tailing-off."

"It doesn't mean they're broken or going to zero, all it tells me is they're going to be underperformers and managers should be trimming back," he says.

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