How to find the opportunities
I’m super excited for the conversation we’re about to have because the timing couldn’t be better. It’s really important to mention that the timing of knowing how and when to shift in terms of market behavior, the sectors you wanna focus on, and the stocks related to that sector are probably some of the most important shifts that you can make as a trader.
Now, we sort of started this conversation off in the last issue, where we discussed where we’re not looking. That conversation opened up the door to another. While we have watchlists…
There are also… Do not watchlists…
There are places that we don’t want to be looking… Right now, I have 19 trades, 18 entries that we’ve had since February 25th.
Now, I don’t emphasize this because we’ve been trading a lot, in fact, I don’t think that’s a lot of trading — especially considering the opportunities that we have right now. The opportunities that we have out there at this moment aren’t in the NASDAQ, and aren’t necessarily in the S&P, but rather, they’re a little bit more granular.
They’re in the individual sectors and stocks that are relative out performers right now.
Step 1: So what’s on this list?
On this list are things like KBH and Toll Brothers. KB Holmes and Toll are tethered to a narrative. And that narrative — home construction and home builders are doing quite well. Looking at XHB and ITB it may not look like much until you look at something like the QQQ, which is the NASDAQ.
Relatively speaking, this is a completely different psychology at work in the “NAS” as opposed to XHB. We got even more granular by looking at Toll and by looking at KBH, which have already moved from our entries to our first target. Frankly, we could look at jumping on this again, and that’s where the best kind of trades come from.
They come from places where we can roll with trends and, instead of parabolic accelerated markets that never seem to come back to us for a retrace where we can buy again, these have been (and are) more healthy for a trend retracing after moves higher.
Step 2: Let’s use another example…
Let’s go back to some of our trades where we’re even looking at things like bridging our trading and futures with the ETFs that are available to us.
This is CORN and SOYB — both have been very interesting and profitable trades for us on the future side. So what I do in my Sector Secrets Mastery with these opportunities (where commodities are going to influence certain stocks) is I think about oil and oil stocks, or in this case, soybeans, the Zetas futures contract, and SOYB (the soybean fund.)
“I don’t know if you know there was such a thing as a soybean fund,” well there is.
If you’re not interested in playing the underlying futures contracts, we can then shift over to looking at something like CORN for Zed C.
Step 3: Take a look at these uptrends…
A few issues back in Countdown Trader, we talked about the importance of understanding the current macro environment. CORN, SOYB, ITB, XHB, Toll Brothers, and KB Homes, those are all in that macro picture, they all work. You might say, what do corn and home builders have in common?
This macro environment.
So if you know where to look and when to make that shift, you’re gonna be able to follow trends like this. I’ll even show you a quirky one, which is a trade based on Uranium, and this was a market that popped up very nicely for us.
Now, another thing I wanna point out as we wrap up this conversation is, again, if you’re looking at the NASDAQ, if you’re looking at the S&P, you’ve been pretty frustrated. The activity just isn’t there, the opportunities just aren’t there.
So consider taking a look at XLF and XLE, and these commodities that we’ve talked about, and home builders and home construction. If you also look at the narratives that are tied to, in this case, energies, with crude oil, financials, even regional banks, you’re gonna find there’s much better clarity.
Additionally, we’ve been focused on communications. Take a look at XLC, the second most heaviest weighted part of the “NAS”, and take a look at the “NAS” itself. Two different narratives at work, because there are two different groups of stocks that are outperforming the market, communications versus broadly, tech.
These are the keys to knowing when to shift and therefore knowing where to look, and this has been the conversation that we’ve been having in this community for weeks, if not months.
It’s a macro conversation, and now we’re taking it to, “how do you make this macro tactical, how do you make it functional?” So that’s what we’re talking about, your functional macro economics.
I’ll see in the next update.
