A Diamond in the Rough: What Oversold Sectors Are Hiding
In my last column, I pointed out that the stock market pullback is creating buy-the-dip opportunities in certain sectors and stocks.
Specifically, Healthcare stocks are not only way oversold… but they are also in a seasonal sweet spot that could lead to a rebound in the sector.
And Healthcare isn’t the only sector that could see a nice jump to the upside.
In fact, there are a few sectors rising to the top of my personal watchlist.
And you might want to consider them for yours, too.
Here’s why…
The Red Flags Are Flying… For Now
A few weeks ago I wrote that “Financial Stocks Are Flashing A Warning Sign.” Growing stress in the nearly $2 trillion private credit market has thrown financial stocks for a loop.
As a result, the financial sector is down nearly 11% over the past three months compared to a decline of less than 5% for the S&P 500.
But just like any other sector, not all financial stocks are alike.
Stocks with direct exposure to private credit, like Apollo (APO) and Blackstone (BX),may be most at risk. Not even mega banks like JPMorgan Chase (JPM) have emerged unscathed because they, too, have indirect lending exposure to private credit.
But the regional banks have held up much better than the rest of the sector so far.
Let’s take a closer look at the latest data (as of March 25, 2026) from our Market Outlook and S&P 500 Sectors.
After you’ve logged into TradeSmith Finance, select the Markets tab on the top navigation bar.
On the left is a screenshot of the Market Outlook page.
You can see that all three major indexes (S&P 500, Dow 30, Nasdaq 100) are now in the Short-Term Health Indicator Red Zone. Yikes!
And recently that attracted the attention of my colleague Jeff Clark, who sees upside in Financials. (More on that later.) I agree with him, but there may be an even more timely opportunity for regional banks that have held up better than most financial stocks.
Don’t Miss the Opportunity to Dig Deeper
To view detailed data on components of the Financial Services (XLF) sector, simply click on the title in the sector column above, or enter XLF in the Search for Ticker box.
Then click on Holdings to view the entire list.
Many big-cap financial stocks including Wells Fargo (WFC) and American Express (AXP) are in the Red Zone.
But the regional banks highlighted above remain in the green and yellow zones for the most part.
Many of these stocks are holdings of the SPDR Regional Bank ETF (KRE). Unlike XLF, KRE is in the LT Health Green Zone and the ST Health Yellow Zone.
This means the sector remains quite healthy long term. And it’s presenting a buy-the-dip opportunity as it pulls back into an oversold zone short term. The same goes for the Green Zone holdings in KRE.
Plus, taking a closer look at KRE reveals another potential bullish catalyst on the horizon.
According to our Trade Cycles market timing indicators, KRE is approaching a bullish upturn area starting this week.
That’s the purple line in the chart above that I highlighted with up arrows.
Our Trade Cycles tools include thousands of recuring cycles in financial assets of different lengths.
This includes short-, mid- and long-term cyclical patterns that tend to consistently repeat over time.
This cyclical uptrend in KRE has started already and should continue into July according to our analysis.
You could consider buying KRE here, using $56.48 (denoted in red in the chart) as your stop to manage risk on the trade.
Or you could consider screening for individual bank stocks that recently entered the Short-Term Health Green Zone, which I have below:
Simply go to the KRE Holdings tab again, as shown above, and click to sort by the Health (ST) column.
This screenshot includes the top 5 stocks in KRE that have most recently triggered flash buy signals by moving into the Short-Term Health Green Zone.
All these stocks also have excellent Long-Term Health.
Mike Burnick’s Bottom Line: The Financial sector has been hit hard during this market pullback. But many regional bank stocks remain in our Health Indicator Green Zone and could offer upside potential. You can take advantage of this in a single trade with the SPDR Regional Bank ETF (KRE), or by zeroing in on healthy bank stocks that are holdings in the ETF.
Good investing,
Mike Burnick
Senior Analyst, TradeSmith
P.S. As I mentioned early, my colleague Jeff Clark has also been zeroing in on hidden opportunities in the Financial sector.
He mentioned to his Market Minute readers earlier this week that the indicators he follows that showed bank stocks were overbought as recently as January… have now changed to showing the sector as oversold.
And this is the perfect opportunity for Jeff.
But you have to move quickly with opportunities like the ones he spots.
Times like these give us the rare chance to generate years or decades’ worth of financial progress – in just a few months of trading.
But having managed money professionally for CEOs and celebrities, Jeff will tell you that this window can close as soon as it opens… so you want to move as fast as possible.
Click here to see how this works – and get into position now.