Why I’m focusing on value areas…

Of the Market

Let’s discuss the market… what a ride it’s been lately, and as we slowly inch towards another Run into Earnings there are a ton of important things to talk about.

Below is everything from the Fed decision to how FAANG is no longer the leader it so proudly was to what YOU can actually trade in this market.

Here’s where we stand...

Overall, I view the indexes as having gained strength in the pre-Fed break above resistance at $2950 in the S&Ps. However, I’ve viewed this sluggish rally with a lot of caution. Key momentum stocks such as stocks in the cloud computing sector (with the exception of MSFT) have slowly faded over the last 7 weeks, along with the once hot IPO names, and cyber security industry groups.

Even FAANG isn’t the leader it once was…

With NFLX dying a slow death, and FB making a weak attempt to trade higher. AMZN is clinging to its 200 SMA. MSFT and AAPL are holding up, but they can’t hold up the market alone.

Bottom line, there aren’t a lot of industry groups or sectors out there right now that I like for a buy. Especially in the lagging sectors XLE and XLF that saw a bit of rotation last week. Until key momentum and high growth names can get it together, I’m focusing on value areas of the market, particularly XLP, in addition to Gold and Bonds.  

My key bullish focus here is on XLP and XLU, though I prefer XLP in the options market.

XLP only slightly faltered in the beginning of August, along with everything else, but quickly rose like the Phoenix and has maintained strength. The additional reason I’m watching it is because of the Run into Earnings. When we approach about 3-4 weeks prior to earnings, I like to focus on key technical and fundamental names in a strong sector, and trade these higher going into their earnings reports. 

With the current pullback from the high and current consolidation, I’m looking for a break to new highs in XLP, and watching several key stocks along with it.

I like:

  • COST
  • KO
  • PEP 
  • EL
  • HSY

For this trade, I like to watch for stocks that have a positive pre-earnings history of trading higher about 3 weeks before and then going into the report. I also look for those tickers to have reported positive and continued to maintain a strong trend after the fact.

With the pullback to the mean these stocks are experiencing, they’re in a great spot for entries with an edge prior to the next earnings reports. These are the stocks that fit the bill. 

If you want to follow along in a more in-depth way, in my Stacked Profits Mastery program, we’ve been trading COST, GLD. and TLT.

This is where I take the overall macro view and distill it into trade ideas — and give you a look over my shoulder as I take my entries and exits. Want to join me? Click on the link here.

I’m heading to NYC tomorrow, where I’ll be doing a media round on Fox, Fox Business, the Nasdaq Tradetalks, and more. Follow me on Twitter @traderdanielle, on Facebook at www.facebook.com/traderdanielle, or on Instagram at traderdanielle618 for my most recent media happenings.

It’s going to be a fun week!

P.S. If you want my complete market analysis, I joined CNBC to discuss all that and what I’m trading this week. Click here or on the image below to watch now!

 

Danielle Shay on CNBC Trading Nation
Danielle Shay discusses potential run into earnings trades in XLP on CNBC.

Leave a Comment

Up Next...

Critical Stock Market Red Flags

With earnings season just beginning, we are entering the most risky time frame for the stock market. Netflix earnings week is already kicking off with a bang. The Nasdaq sold off yesterday, ending the day down -1.67%, with critical stocks like Tesla down -5.59%, Microsoft down -1.97%, and Meta down -2.28%. This occurred after escalating … Read more

Read More

Using Conservative Sell Signals To Exit

Hey traders! In this week’s trade review video, I discuss the conservative signals I had that caused me to take a cautious profit on Amazon. Sometimes I’ll take conservative profits, especially in a case like before CPI data when a news-related event is upcoming. Now, of course, if you take conservative profits, you cannot capitalize … Read more

Read More

The Biggest Pre-Earnings Movers

Identifying Stocks on the Move This week marks the kick-off to Q1 earnings season, as the banks will begin to report on Friday. This means that we are in the prime time for pre-earnings movers when stocks will move either up or down as investors make moves before earnings. To look for patterns and tickers, … Read more

Read More

Subscribe Today!

Want my up-to-date analysis, setups, top trading tips, and more? Be a Five Star trader, and join my free newsletter today!

Sign Up Now
all-as-seen-on-logos