Marijuana stocks have been hot the past couple of weeks. We took some trades on several cannabis stocks in the past week, capitalizing on the sector momentum. CGC, CRON, TLRY were a few names we traded recently. So how do you find sector momentum plays and how should you trade them? In our latest video lesson we go over how to find and trade pot stocks, and the best patterns to capitalize on their momentum:
How To Find Sector Momentum
You need to be running sector scans every night. Every week you need to be figuring out where the money is flowing. TC2000 allows you to run industry index scans by percentage gainers (usually within the past 5 days). This is a quick and easy way to see what sectors are strong.
Once you see what sectors are strong, you should figure out which stocks are leading the sector momentum. You have to do the homework the night before and the morning before the market open. Do not rely on someone else to tell you what stocks to trade on any given day. All the successful traders I know are self-sufficient.
How To Trade Sector Momentum
Now that you have identified a sector that is running and have found stocks that are leading the momentum, you need to figure out which stocks will be on your watchlist. As momentum traders, we want to find the stocks in the sector that have highest probability of a explosive move. That is the most efficient use of your capital and time. CGC (WEED for Canadians) was a great stock to trade yesterday, because it fit all the criteria of a high quality momentum stock.
CGC had major expanding volume, a major daily breakout on its daily chart, and gave us a great intraday setup to get a low risk, high reward play. CRON was another stock you could have traded, that had all of these characteristics. CRON has had a history of making huge moves as well, like it did back in December of last year, and could go on a multi-day run.
Keep These On Watch For Upcoming Days
These stocks will be on the top of my watchlist for continuation momentum this week. When a momentum sector heats up it can often run for several days and sometimes weeks. They always run further than you think, and the run has barely begun in these marijuana related stocks. CRON and CGC just had a day 1 breakout on their daily chart, and they both have a ton of room to run.
The last major sector run was the China stocks back in June. Look how far they ran, even when everyone was talking about how overbought they were. Fundamentals matter very little during these major sector runs. But at the same time, these are not stocks worth marrying for much longer than a swing trade. Keep these on watch for the rest of the week!
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