Profiting from the Momentum Sectors in Today’s Market
Thursday, October 6th, 2005
By Mitchell Clark, B.Comm. for Profit Confidential
I don’t know where this stock market is going to go, but with the Federal Reserve on the inflation warpath, the broader market is vulnerable. Frankly, I believe that our monetary policy is about right. We’ve got to keep inflation in check, especially as we’re right in the middle of a high commodity price cycle. As long as the Federal Reserve moves gradually, this economy will be alright, in my eyes.
With the broader market trading sideways, if you are an equity speculator wanting to take on new positions, your best bet right now is to be a momentum player. High multiple growth stocks aren’t likely to do too much. Similarly, low multiple value stocks are likely to stay that way for the foreseeable future. The only option for shorter-term stock market speculators is to buy only those stocks that are already going up, meaning those stocks with strong relative strength.
Of course, this means speculating in energy related stocks. This means focusing on metal and mining stocks. This means considering alternative energy stocks. These are the momentum sectors in today’s stock market. Combine these market sectors with strong risk management tactics, and you should do well in an otherwise flat market environment.
Furthermore, if you have some winning positions, don’t forget to maintain moving stop-loss limits to protect your profits. Next to outright losses, there’s nothing worse than giving up capital gains. I like to maintain a 10% moving stop-loss limit on any profitable position. This way, at least an alarm bell goes off and I can consider taking some profits. After all, no one ever went wrong putting money in the bank!
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Tags: federal reserve, market view, stock market
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Mitchell is a Senior Editor at Lombardi Financial specializing in small-cap stocks. He’s the editor of a variety of popular Lombardi Financial newsletters, such as Penny Stock Reporter, Micro-Cap Stocks, and Monster Profits. Mitchell, who has been with Lombardi Financial for thirteen years, won the Jack Madden Prize in economic history and is a long-time student of equity markets. Prior to joining Lombardi, Mitchell was as a stock broker for a large investment bank. While Mitchell is not working he enjoys fly fishing, motorcycling and tending to his hobby farm.
