When things get nuts, I like to step back and double check all of my assumptions and look at what has consistently provided success for me and my trading style. Without question, using simple logic has always been the most successful. Let me give you an example of what I mean. As we started to see the bottom after the COVID crash in 2020, it became clear that vaccines were going to be a big part of how the pandemic was handled. At the time I looked into the top vaccine manufacturers and chose 5 that were significant players in that space. A position in each of them made a lot of sense. There were all major companies and were unlikely to go away. One or two would probably lead the group but they would all likely get wind in their sail.
Often you will hear people say that “that is already priced into the stock”. While that can be true to an extent, more often than not it doesn’t represent the full potential of the move. The vaccines stocks did great and almost tripled before pulling back.
Using that same simple logic, what group of stocks do we see getting a big tailwind? Keep in mind, this is looking at the longer term of 6-12 months. You could buy and hold these stocks but also valuable is to be able to keep an eye on a group that have a higher likelihood of going up. Here is a chart of what I am looking at now as a market segment to watch.
Oil prices are shooting up at the same time the we are gaining more and more confidence that the lockdowns are behind us. As people want to get out more, start going back to the office more, and really start traveling, the demand for affordable ways to get places is going to keep climbing. Electric vehicles have been growing in popularity and are becoming much more mainstream. There is a lot of simple logic that this market will grow rapidly.
When you look at the chart above of IDRV, the ETF that tracks stocks related to EVs, you can see it is pretty beat down. You could just jump right in and hope that we are at the bottom, but it would be better to get a little more confirmation. If we could see a move toward or above the 10 day moving average and the MACD curl up just a bit it would be a strong sign. We can also keep an eye on the major auto manufacturers to look for them to start to break out. They are still struggling with supply chain issues and getting the tech they need but they are extremely motivated to solve that problem.
Ian Cooper has put together an incredible approach to using the news to spot great opportunities. By seeing what is getting hyped in the news and then using a select group of indicators he can consistently spot huge moves as they are setting up. Click here to walk through how he does it.
Keep learning and trade wisely,
John Boyer
Editor
Market Wealth Daily
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