Using Sectors as a Guide to Trading
One of the ways I try to generate ideas for where to concentrate my efforts is by using sector rankings to determine where to look. When the market begins to confirm a thesis you have that represents a change in the intermediate term direction, you can often do some scans to decide what spots are ripe for either going long or short. Currently my thesis is that the market will trade lower intermediate term changing from the sideways affair. If true, then I would like to generate ideas for some short side trades.
Tonight I have taken and pulled two ordered lists for sector returns. On one list are the longs and the other the short potentials. Within the two lists I've chosen to break them down by how they have performed for the past month and the past 5 trading days. I chose these time frames because the past 5 days we have seen a change in direction short term and the past month we have been going sideways.
Next I look to see what is common in the two lists. If the past five days has seen pressure on stocks that have also been under pressure for the past 30 days, then those sectors are probably good places to look for potential short positional setups. Here's that data.
Vice versa, if you are still long or wanting to be long, a common sector on the two would be a could choice. Again, here's a look at that data.
I've been looking for any good short term short setups and have identified a number of sectors to look through. Now this is just one way of looking at the data. I'm sure there are others. The point of the exercise is to consider the combination of sectors across time frames at critical junctions to identify possible trades.
Tonight I have taken and pulled two ordered lists for sector returns. On one list are the longs and the other the short potentials. Within the two lists I've chosen to break them down by how they have performed for the past month and the past 5 trading days. I chose these time frames because the past 5 days we have seen a change in direction short term and the past month we have been going sideways.
Next I look to see what is common in the two lists. If the past five days has seen pressure on stocks that have also been under pressure for the past 30 days, then those sectors are probably good places to look for potential short positional setups. Here's that data.
Vice versa, if you are still long or wanting to be long, a common sector on the two would be a could choice. Again, here's a look at that data.
I've been looking for any good short term short setups and have identified a number of sectors to look through. Now this is just one way of looking at the data. I'm sure there are others. The point of the exercise is to consider the combination of sectors across time frames at critical junctions to identify possible trades.
posted by Tat | 8:33:00 PM
2 Comments:
What about looking for short term strength with which to short into? Of course, this would have to be aligned with overall shortterm market strength as well. I have a similar approach but I look at 3 month, 1 month, and 1 week performance and rank these. Within the weak sectors I'll actually look for 3-5 day rallies on low volume with which to short into. Many times this works but at times trades can be invalidated by the overall market action. When you have a chance, could you elaborate on how you might "drill down" to individual issues, i.e. do you look to short a breakdown of the weakest issues or short the rallys?
Short term strength would be another way to do it as well. There are variations as I suggested in closing on the article and yes, the overall market is a big part of it. I wrote this last night as I'm looking for continuation of the market lower and was searching for stocks in sectors that were on the verge on joining their respective counterparts in going lower in those sectors.
As for the drill down, if you take a look www.prophet.net; click on the explore tab then the Industry Rankings sub tab you'll see the list I short here. At the right of the table is a charts button which pops you right into the sector charts. As you know, I'm quite big on prophet.net as it allows me to do my work wherever I may be is quite powerful and for a small yearly fee gives you a lot of extras while you support their efforts.
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