Click on the image above to learn more and watch Danielle’s segment on CNBC.
This week, on CNBC’s Trading Nation, I discussed the stock market condition over the course of the last seven weeks. What I’ve seen, is that we’ve had a loss of momentum in high growth stocks, including the cloud computing and cyber security industries, recent IPOs, and several stocks in FAANG, most notably Netflix, Amazon and Facebook. I’ve also seen money flow going into safe haven areas of the market, like gold and bonds, along with value areas of the market such as consumer staples (XLP) and utilities (XLU).
What does this mean for investors and traders?
Typically, in a strong market, we are going to see hot momentum stocks trading higher each instance when the market pulls back. The market is always going to ebb and flow, and after down days in the market, its been typical that the momentum stocks listed above have climbed higher rapidly after each downturn. Over the course of the last seven weeks, that hasn’t been the case, which leads me to believe that the stock market is losing momentum to the upside.
Now, this isn’t all bad, because there is always a bull market somewhere, and right now, that upward trending market is in utilities and consumer staples. A couple of my favorite consumer staples stocks include Costco (COST), Hershey’s (HSY), and Estee Lauder (EL). These stocks have strong fundamentals, as well as technicals, and have held up really well despite on-going political tensions.
I am also eyeing this sector for an upcoming, ‘run into earnings.’ which is a typical trade I do every earnings quarter. I like to focus on strong, relative strength names and trade them in the options market as they run higher in anticipation of their quarterly earnings results.