Price Forecast:

Bullish Case: XLI's consistent historical strength combined with elevated infrastructure spending signals potential for sector growth, reinforced by strong Q4 earnings expectations.

Bearish Case: Rising material costs and persistent supply chain issues pose significant risks, potentially leading to a correction despite initial sector resilience.

Potential Outcomes:

• 1) 40% chance XLI rallies to $140 due to improved earnings and economic recovery.
• 2) 30% chance of a pullback to $125 amid inflationary pressures.
• 3) 30% probability of trading sideways around current levels due to mixed signals.

Trading Oracle: Consider executing a bullish debit spread by buying XLI 03/21/2025 135.00 calls and selling 140.00 calls to leverage the expected upward momentum. This strategy offers high reward-to-risk and capitalizes on current implied volatility levels. Additionally, watch for protective puts around nearby support levels for downside protection.

December 19, 2024