Relative Strength and Market Selloffs
Back in 2015 Kunal and I did a webinar detailing exactly what to do if the market shows indications of a selloff. One of the 14 tips is to build a watchlist of relative strength stocks.
I like to start building the relative strength list right when the market shows potential for a selloff, rather than when it actually goes into selloff mode. This has me prepared during a critical period when the fast decline of a selloff often leads to poor decision making.
That is why I am building a relative strength watchlist now, rather than waiting for a panic move. While the market was down over 1% for the first time in over 100 days on Tuesday, we are not officially in selloff mode. However, I am ready in case it does.
Relative Strength Stocks
What is a relative strength stock, and how do you pick one to trade?
It’s a stock that is beating the market or it’s own sector. I identify these 3 things when picking a relative strength stock:
- Percentage gain or loss versus the market
- Where it is in relation to key moving averages versus the market
- Specific setups that may be triggering
SPY is below it’s 9ema and testing it’s 50 day moving average. All of the stocks I picked are doing better than SPY in relation to these key levels, and have better percentage gains versus the market in the last two days. They also have specific setups that are either triggering or close to triggering.
5 Stocks to Watch
In today’s video I go over 5 stocks beating the market, why they make the relative strength list and setup triggers that would get us to trade them. Take good notes and start building your own relative strength watchlist.
How the Swing Trade Report Helps:
I hope that learning the 7 habits of effective part-time traders has helped you focus on techniques that will improve your trading. I’ve designed my swing trade report to help those who are new to part-time trading avoid the hurdles that held me back for years. First is the education. As I mentioned above, it’s easy to collect “trading trivia” that feels valuable on the surface but is functionally useless. The strategies that I use and teach have zero fluff. If something isn’t useful in the real world of trading, I don’t include it. As someone engaged in part-time trading, you must focus your limited hours and mental bandwidth on what is most useful, and my report will help you do that.
One of the biggest mistakes I made as a new trader – and it’s one that almost all new traders make – was not managing my risk properly. It’s important to understand that the way a day trader and a swing trader manage risk aren’t identical. When you are part-time trading, you can’t sit and watch every tick of a stock. Some stocks that would be fine to day trade are simply too volatile to swing trade safely. I curate my watchlist with this in mind, leaving out the craziest momentum stocks, while keeping huge movers like $FCX (19% gain, 3-day hold), $UCO (27%, 2-week hold), and $NUGT (24% 2-week hold). When I alert a stock from my report, you run little risk of missing the entry and chasing, and you won’t have to be worrying that it will make a drastic move overnight.
The swing report will help you gain confidence as a trader. Rather than trying to piece together something that works from a random collection of books, forum posts, and blogs, you’ll get one concise, cohesive report that gives you everything you need. No more jumping around from one system to the next. No more blindly following the latest social media buzz. You’ll earn your confidence as a part-time trader one successful swing trade at a time.
