Leadership Rotates–So Rotate With It
The public perception of the Middle East instills
fear among traders. People get depressed. People sell. The market drops
relentlessly.
But amid this the fallout there’s plenty of long side opportunities in the
energy sector, whether you’re a long-term or short-term opportunist.
When I looked at this setup in Coast Group
(
CGP |
Quote |
Chart |
News |
PowerRating) this morning, it was a
powerful reminder of how important it is for traders to accept and embrace the
reality that the market is rotational. Tech has been and probably will continue
to be the dominant force once the bullish environment resumes. But I’ll
paraphrase one hedge fund manager who said:
You can date a sector or group, but you should never marry it.
Look at this. Just look at it. I almost want to throw up…it’s just a
classic setup. As I write this, CGP is trying to break out from a two-month
triangle on the rise in oil prices stemming from the outbreak of violence in the
Middle East. If you look at a weekly chart, the technical picture grows even
more impressive. A trend like this will be hard to break, even though the news media is reporting that yesterday’s spike in oil price is easing a bit.
CGP has a 12-month relative strength ranking of 82, a six-month of
84, and a three-month of 86. If you go to our Stock Scanner and run a scan of stocks
whose RS is between 80 and 99 for the 12-, six-, and three-month time frames, you’ll
find it densely populated with other of CGP’s energy sector breathren.
I don’t know whether this setup will produce a good move. But
it’s certainly nice to see it on a morning on which all too many traders are
fixated on the pitiful patterns that techs and even biotechs are
unfolding. If you’ve been lamenting techs, maybe it’s time to hit the dance floor with another partner.
Leadership rotates, so you must rotate with it.
I am looking forward to meeting many of you tonight at the
TradingMarkets2000 cocktail party. When we have a chance, let’s get together and
chat about these wacky markets. There seems to be an interesting scenario that,
with 20-20 hindsight, is making some sense to me, although I never would had the
guts to predict it.
Till this evening,
Eddie