Posted in
Education
By: Tom Gentile
on April 29th, 2022
If one looks at the performance of the Dow Jones Industrial Average on a day like yesterday they would think Wow! The markets are on fire and things are going really well!
But for those of us that have been paying attention to the markets and this is a large part of our livelihood you know better.
Days like yesterday are indicative of what happens in bearish market conditions. The markets can rally strong for a day and the get wiped out in subsequent days to the downside.
Until we see a series of higher highs in the charts things are still deemed soft.
It doesn’t mean we can’t find opportunity with a bullish pattern that has performed well over the past 10 year over the same relative period of trading days in those past years.
I highlighted UNH last week, and this week I am going to show you a way to participate in a sector rather than trying to pick that one particular stock in a sector. I call it trading the haystack and not the needle.
Trading a Sector over Just One Stock like AMZN
A benefit to trading a sector like an Index or an ETF that tracks an index OR trading an ETF that is comprised of a percentage weighting of a batch of stocks in the same industry as oil, retail or what I have shown here – Health Care, is that you are participating in a grouping of stock versus just the one.
We are in earnings season and when a stock like Amazon.com, Inc. (AMZN) reports a less than stellar earnings and revenue number and the stock gets hit hard, that affects ones portfolio negatively and that stock percentage drop can be exceptionally large.
The sector it is in will likely get hit and drop as well, but on a percentage basis maybe not as much, because other stocks in that ETF may be faring well enough to offset that terrible number from the one stock.
It is true and parents you know, if you have more than one child when one gets the measles they all are at risk of getting the measles. I am not saying the ETF or index is safe. I am saying it may not take as much of a hit as the one stock.
Index funds and ETF’s are a way to be diversified and not be at risk of suffering too great a loss versus the stand-alone risk of a single stock outside of the index or ETF is.
App: Toms Option Tools
Toms Option Tools scan the markets for bullish and bearish trade opportunities using our proprietary scans and strategy algorithms. TTR Darknet finds bullish entries based on triple stack channel collisions. Money Calendar identifies seasonal patterns with at least 90% accuracy looking back 10 years. Weekly Cash Clock finds short term opportunities that last a week on average. Microcurrency Trader applies Darknet technology and moving averages to cryptocurrencies. Velocity Trader utilizes volume spike and Velocity indicators on custom stock lists. Quantum Scripts scans the markets for momentum acceleration signals and employs Quantum noise filters. Optimal Trader finds directional pre-earnings opportunities that are optimized for entry date, stock movement, and volatility surge. My Trades tracks the profit/loss of your trades, displays stock charts and risk graphs, creates new trades, and edits existing trades. Morning Report provides top 10 option rankings in 6 categories each day.
Disclaimers
Stock and options trading has large potential rewards, but also large potential risk.
You must be aware of the risks and be willing to accept them in order to invest in the stock and options market. Do not trade with money you cannot afford to lose.
This is neither an offer to buy/sell/ or recommend a particular stock or option.
Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been actually executed, the results may have under or overcompensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with hindsight.
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