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One of the things I do every week is take a top-down view of the market to look for trade opportunities. I'm more a trader than an investor, which means keeping tabs on market movements on the per-week and per-day basis, rather than long-term trends.
And it's easier than ever to do it, now that we have ETFs in just about every business sector imaginable. These make a great general barometer when you're looking for trades, because their technical properties mirror the assets that the funds are invested in.
So, looking from 10,000 feet, my team and I check the percent of stocks, sector-by-sector, trading above their 50-day moving averages. We use that particular metric because it's a crux point for a handful of technical patterns that indicate potential upward or downward momentum.
Here's what our search found this week...
Of course, what we're looking for are the highest percentages of assets from these ETFs trading above their 50-day moving average. This is where we're going to find the most gains and the best opportunities for profit.
The way things are looking this week, I can already tell you that a storm is brewing for stocks in the red and orange territory. Sectors like biotech and home construction seem to be some of the worst in breed right now.
But everything in the green suggests sunny skies ahead, and that's where my watchlist is going to focus today.
For the tickers you should be watching right now, read on...
Renewable Energy Is About to Jump
A few months ago, when we were getting beaten up by green energy, I was still building long term positions in certain sector leaders.
There is a reason - we're going to see another wave of investments in clean energy, for a few reasons.
In the economy's eyes, this is an industry that has to get built up one way or another. Regardless of your position on climate change, there's broad agreement on the idea that our current dependence on fossil fuels is unsustainable and that we need to lean more on renewables in the future.
The supply-side crisis we're seeing on oil and natural gas, as a result of sanctions against Russia, is just one of the things lighting a fire under green energy investment right now.
So what we should be looking for are potential gains in green energy ETFs and stocks, such as Global Clean Energy ETF (NASDAQ: ICLN) and Plug Power (NASDAQ: PLUG). The chart on PLUG looks especially good:
Just as a cautionary note, they absolutely have to take out the 200-day moving average for their upside trend to remain.
That isn't to say they won't make the jump up there - I think it is only a matter of when and not if at this point.
How to Profit from the Return of Infrastructure
Everyone is talking about the checks that are on their way from the government's investment in infrastructure, thanks to the passing of the Infrastructure Investment and Jobs Act with bipartisan support.
That means serious cash coming into this sector very soon, and we're seeing a great pattern forming on one particular stock...
Just take a look at this little golden cross gem on United States Steel Corp. (NYSE: X).
I don't know what the exact number is, but there are not many companies out there seeing this kind of activity. Still, it's worthwhile looking through the assets of an ETF like the Materials Select Sector SPDR Fund (NYSEArca: XLB) for other stocks that are on the cusp of forming this pattern.
Right now, I would note that we are in overbought territory within this sector but there hasn't been signs of crescendo volume.
That means there is plenty of room before these stocks top out.
Keeping Tabs on Options
Let me show you the tracker I use to look at potential options trades.
Below you will see all the stocks under $10 with the highest activity yesterday.
This is the ultimate starting place to find opportunities each day because it lets us know where there is sufficient volume to create lucrative swings.
From this chart, and a little more digging, I found a great set of five stocks to keep an eye on:
- Mullen Automotive Inc. (NASDAQ: MULN)
- SoFi Technologies Inc. (NASDAQ: SOFI)
- Camber Energy Inc. (NYSEAmerican: CEI)
- Ring Energy Inc. (NYSEAmerican: REI)
- Bitnile Holdings Inc. (NYSEAmerican: NILE)
I spend a lot of time looking for trades for the viewers on my various broadcasts, like my daily weekday 10 a.m. EST slot on Money Morning LIVE, The Long and the Short of It. To find out what I look for and how to trade these stocks, you can always catch my show here, along with a lot of other great analysis from my fellow hosts.
In addition, I have a special interest in trading small-cap stocks, and my new service takes a deep dive into that world.
I started finding these opportunities after trying out a new technique for making plays on sub-$10 and even sub-$5 stocks, and I have to tell you - the returns have been amazing: 435% in seven months... 280% in 11 days... 311% in 29 weeks... even 788% in a year.
That's why I started up a program to teach people how to take advantage of these "penny rockets" for the chance to make boatloads of money on these heavily discounted stocks.
About the Author
Chris Johnson is a highly regarded equity and options analyst who has spent much of his nearly 30-year market career designing and interpreting complex models to help investment firms transform millions of data points into impressive gains for clients.
At heart Chris is a quant - like the "rocket scientists" of investing - with a specialty in applying advanced mathematics like stochastic calculus, linear algebra, differential equations, and statistics to Wall Street's data-rich environment.
He began building his proprietary models in 1998, analyzing about 2,000 records per day. Today, that database, which Chris designed and coded from scratch, analyzes a staggering 700,000 records per day. It's the secret behind his track record.
Chris holds degrees in finance, statistics, and accounting. He worked as a licensed broker for 11 years before taking on the role of Director of Quantitative Analysis at a big-name equity and options research firm for eight years. He recently served as Director of Research of a Cleveland-based investment firm responsible for hundreds of millions in AUM. He is also the Founder/CIO of ETF Advisory Research Partners since 2007, noted for its groundbreaking work in Behavioral Valuation systems. Their research is widely read by leaders in the RIA business.
Chris is ranked in the top 99.3% of financial bloggers and top 98.6% of overall experts by TipRanks, the track record registry of financial analysts dating back to January 2009.
He is a frequent commentator on financial markets for CNBC, Fox, Bloomberg TV, and CBS Radio and has been featured in Barron's, USA Today, Newsweek, and The Wall Street Journal, and numerous books.
Today, Chris is the editor of Night Trader and Penny Hawk. He also contributes to Money Morning as the Quant Analysis Specialist.