Importance of Finding Stocks or Sectors in Play

As the market continues to grind higher I hear more and more from traders about the lack of opportunity.  Honestly I think these traders are looking for an excuse as to why they are not making money.  This market continues to provide money-making opportunities to traders who are doing well thought out research and coming up with a detailed plan for the day. 

As the market has slowed recently I have found that most of the opportunities are limited to certain sectors that money is either flowing into or out of during a certain timeframe.  Most of my money has come when a sector has a well-defined trend, where I know that I want to be long or short, and keeps that trend for a week or two.  The best example I can find of this has been the gaming sector since the beginning of March.  I had a game plan for the stocks in this sector and basically was just looking for areas to get long.  Some days the opportunity was there and some days it wasnt, but when it was there I made what I was supposed too.  Another example has been the homebuilders sector over the past week.  Stocks like Hovnanian Enterprises(HOV), Lennar(LEN), and KB Home(KBH) have made very strong moves to the upside. 

The importance of finding sectors in play is that you start to get a certain feel for how the stocks in the sector move.  I’m at the point now that I can tell if the casino sector is in play during the first few minutes of the day.  You know what levels the stocks in the sector have to be at to be in play, and you know when the order flow is just noise. 

Identifying where the money is and isn’t is one of the most important things a trader can do.  Finding institutional order flow and following can lead to bigger moves and easier money.  The key is finding these sectors in play, identifying them early, and to keep trading them for as long as they are giving you opportunity.  A good free site that I have been using to find different sectors in play is Finviz.  I go to the groups tab and search for 1-day, 1-week, and 1-month performance.  I find the best and the worst performers than scan for stocks that fit my own personal parameters.   Then lastly I rip through charts for the stocks in that sector and come up with a game plan.  Hope this helps everyone in coming up with some trade ideas and best of luck in your trading. 

Kyle

Greecing the Bull!

Today’s market action was a roller coast of good turned bad. The Dow pushed up to 10955.51 on positive news from jobless claims that were at an 18 -month low.  Around 2:00 though, the Dow abruptly sold off over 100 pts. when comments about plans for Greece’s bail out by the IMF seemed highly unlikely.

The sell off in the DOW after the IMF announcement of "tres, tres, mauvais!"

A little back story since the last Greek blog(Feb. 11th) in this soap opera of fellow EU nations. Germany and France have been leading the way to offer moral support, though not monetarily, to the Greeks. This is being done by EU nations to keep the EURO from totally imploding against the dollar. This week the Germans and French were to reveal their plan to help Greece out, but instead passed the buck to the International Monetary Fund.

Today the IMF came out and let the world know their position on bailing out the flailing Greeks. IMF President Jean-Claude Trichet said that getting money from the IMF for Greece’s debt worries instead of EU government’s would be “very, very, bad.” And these 3 words sent the EUR/USD crashing down to make new lows.

Commodities just tanked after this bringing the rest of the market with it, although financials and service sector held onto gains. Tomorrow I will be watching the EUR/USD closely to see if the EURO continues to weaken against the dollar. IF this happens, commodity stocks such AKS will be prime for more shorting. I would also look for a lot of profit taking in tomorrow’s market in these “uncertain” times, so be careful of the longs!

I am not bold enough to say that this is an end to the bull rally, but I think we will definitely see some correction through the next week. Remember the market is closed next Friday. So with the Greece bail out plan far from secure, it would be hard to imagine a lot of buying coming into the market before a three day weekend.

Look for a continuation of the selling in AKS if EURO weakens to the USD..

Making Money When its Available

As traders we are always looking for our edge.  Whether its 5 hours or 5 minutes we need to constantly be prepared.  This preparation starts in the morning with formulating a plan for the day.  What stocks on your list were weak/strong into the close?  What were the important levels from the previous day?  Where do you want to be involved?  All of these questions need to be answered before the opening bell, that way on the open all you are doing is following your plan.  An example of having a plan and following it presented itself in GoldCorp Inc (NYSE: GG) today. 

Going into today I knew GG was a short below $38.  Looking at the charts it was a huge level that the stock could not trade below going all the way back to Feb 16th.  GG traded below it for a little bit yesterday but could not hold.  I knew that if GG held below this number that $37 was the next level of support.  So my plan was to wait for GG to trade below $38, wait for the stock to prove it could stay below this number and then find a nice area where I could manage my risk. 

All of this played out in the first 20 minutes of the day.  GG opened lower pushed above $38 then started trending lower.  I waited for GG to push lower below the opening range knowing that there was a good amount of profit potential and entered on the first pause I saw at 37.60 with a stop above 37.60, so I had a risk/reward ratio of 6 to 1.  I booked half of this trade into momentum when the 10 o’clock number came out and held the rest when GG consolidated around the $37 area. 

They key to this trade was having the plan and making what I should have when it was available.  Everything happened so quickly that if I wasnt ready I would have missed the trade and probably gotten in at a bad spot.  We watched the entire day today traders giving away money instead of trading when things were obvious.  I will take easy .60- .70 moves in 10 minutes any day of the week.  Good luck in your trading. 

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EU’s possible support of Greece leads to rallies in US markets

The Greeks are known for many things. The Parthenon, Pythagorean theorem, mischievous God’s and a debt crisis that is moving the US markets. In this week alone, the market has rallied on news that the EU would help Greece with its debt.

Wednesday, Feb. 9, at 11:45 am the SPY (chart below) reversed their downtrend on the day and bounced from their lows of 106.27 to make new highs at 108.15 ($1.88 or 1.74%.) This 45 minute move was based on unfounded rumors the EU would help out Greece.

Thursday, after an announcement from Brussels that no resolution was made, the SPY bounced from 106.62 to it’s high of the day of 108.25($1.63 or 1.5%.) Again, nothing has been decided although the EU is pledging support.

The dollar, which was gaining strength against the EUR/USD (chart below), initially bounced after the news, but then came back in as it was found to be “premature.” The EU is looking to give in-direct aid, but there won’t be any more details until sometime next week. As of this writing, the EURO is continuing to give up ground to the dollar.

The biggest gainers in US equities on the strengthening dollar have been basic materials. Although the overall sector has been the weakest over the last month down -9.2%. This week it is up 3.7% and more than any other sector. Today it was up 2.7%. (Bar Graph Below)

AK Steel Holding Corp (AKS) was up today 4.74%. It found resistance at it’s 50-day moving average. I will be monitoring it closely to see if it continues to rally as well as paying attention to the EUR/USD.

Shaded areas represent the volatility to the upside in the market.

The dollar is clearly getting stronger against the EURO

Week performance

Day Performance