Home > Lessons from the trading floor, Market Set Up > Importance of Finding Stocks or Sectors in Play

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

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