Stocks are roaring back from their one-day respite as traders and investors are getting over the initial shock of interest rates creeping higher.

From a market perspective, things continue to look good as economic data and strong momentum combine for an almost intoxicatingly bullish argument that stocks will continue higher.

While this may be the case, I’m never satisfied with matching the market’s performance.

No – I want more. Lots more… I require superior returns, and I won’t settle for less.

And today, I’m going to give you a play that “satisfies” with massive upside potential…

Many Are Called, Few Are Chosen… to Be the “Best in Breed”

Depending on which source you choose to use, there are somewhere around 5,000 exchange-traded funds (ETFs) listed globally. Of those, about 1,800 are traded domestically here in the United States.

The market for these is exploding. In 2017 alone, there were more than 207 new ETFs listed for trading.


At the same time, there are fewer than 4,000 individual stocks traded on the NYSE and Nasdaq exchanges combined.

In other words, it can literally be harder to pick the right ETF than it is to pick the right stock. This is where a system to track cash migration, technical trends, and other powerful indicators is a must for generating consistent gains.

My system has clued me into a lot of “cash migration” between sectors as traders are switching their investment focus to those sectors beginning to outperform the market.

This opens opportunities for traders like us to cash in – and cash in big.

Here’s Why This Is a “Screaming Buy” Right Now

My “Best in Breed” ETF system tracks cash migration as well as technical strength, short interest, and other variables as part of a proprietary system that identifies which ETFs it makes sense to be long or short on.

Right now, my system is flashing a bullish signal on the energy sector. More specifically, the SPDR Energy Select Sector ETF (NYSE Arca: XLE).

Here’s why every investor who requires the same kind of fat profits I do should be long this ETF:

  • As of Tuesday’s close, 90% of the companies that make up the XLE were trading above their respective 50-day moving averages.
  • Additionally, 79% of the XLE’s component companies have 50-day moving averages that are trending higher. This is one of the strongest breadth readings for all of the ETFs the “Best in Breed” system tracks.
  • Looking at relative strength, XLE shares are outpacing the S&P 500 by 20% over the last three months. Furthermore, only four of the component companies are weaker than the S&P 500. These stats make the XLE shares one of the strongest in the current market.
  • Based on my proprietary Constituent Weighted Short Interest data, the XLE shares show signs that a short squeeze rally is prepared to add to buying pressure for the ETF. This is occurring as the shares prepare to challenge their 52-week highs around $78.

Based on the current “Best in Breed” ranking for the SPDR Energy Select Sector ETF, a break above $78 is going to cause a powerful combination of short covering and price-chasing as traders will continue to move money from underperforming sectors and ETFs into this shining star.

With little technical resistance in place and higher oil prices on the horizon, it’s time to jump on the “energy bandwagon” – but we’ll do it before it becomes too crowded.

Buy-and-hold investors should be holding the stock with a price target of $90.

But, for far juicier gains, those options traders out there might consider the XLE July 20, 2018 $75 calls (XLE180720C00075000) for a purchase price of $3.90 or less.

A move to $82 over the next month’s trading could yield somewhere in the range of 75-100% gains on this option.

Check in tomorrow with me as I drill down on the SPDR Energy Select Sector Fund ETF (XLE) with my “Best in Breed” system to identify a top stock to own within the sector. This hard-charging approach puts us in the strongest stocks tearing up the strongest sectors, a formula for superior returns in any market!

— Chris Johnson

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Source: Money Morning