Finding the Best Trades — It Doesn’t Have to Be Complicated
I recently came across a few attractive technology stocks that would be considered small- to medium-cap in size. They operate in the semiconductor industry and are still riding Intel Corporation’s (NASDAQ/INTC) coattails. Still, I really prefer gold and silver in terms of a focused equity strategy for speculating at this time. While there’s no runaway market for any sector in this economy, mining stocks offer the best bang for the buck.
Previously, it was U.S.-listed Chinese stocks that were the most attractive sector for speculators. While many of these companies are still growing and highly profitable, weakness in domestic Chinese equities and an attempt to deleverage the Chinese economy have taken the steam out of this sector. This year, I figure there will be some very attractive U.S.-listed Chinese stocks in which to consider buying low.
Previous to the hype surrounding Chinese stocks, alternative energy was the hottest sector on Wall Street. Everything from pollution control technology to solar panel manufacturers was experiencing serious trading action from institutional investors.
These thematic changes to investor enthusiasm do illustrate just how fickle the marketplace is for stocks. If you’re not hot — you’re out. Of course, everything is much more difficult for equity speculators in a bear market. Time horizons for expected returns are always longer.
I like the idea of speculating in gold, silver and other precious metal producers. While you have the risk that the spot price of the underlying commodity will weaken, you can be fairly certain of expected production growth. With gold well over $1,000 an ounce, producers of the commodity are making money hand over fist.
One of the best ways to learn about which groups of stocks are outperforming is to review which companies are hitting new stock price highs on the market. This is also a great way to discover which market sector might be the next big thing.
Even on a small scale (like wanting to make one or two near-term trades), this strategy increases your odds of making a profit on a position. When Intel reported a very good second-quarter performance, almost the entire semiconductor group moved nicely higher. Several small companies operating in related business saw their stock prices experience very strong price moves. These were incremental return trades due to some big, brand-name news. Even in a bear market this kind of trading can make money.
For years, I’ve always made a point of reviewing the daily stock market action. Which stocks hit new 52-weeks highs and which made new 52-week lows. Top net gainers, biggest percentage movers, and which companies experienced substantial new trading volume. It’s a simple procedure you can do yourself on a daily basis and it really helps hone your market view, as well as helps you come up with new trading ideas. Now, more than ever in this market, we need all the help we can get.