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My Most Recent Trades & How I’ll Tackle This Market

By Costas Bocelli September 8, 2022 Facebook Logo Twitter Logo Email Logo LinkedIn Logo

 

This is a challenging market environment. So, let me take a moment to show you how I’ll be analyzing the market and discovering the best possible trades with the highest probabilities.

And, further down, I’ll also talk about two trades I recently sent my subscribers.

Over the past six months, the broad Utilities sector and the broad Energy sector have been the best sectors in terms of absolute performance.

The broad Utilities sector includes the Utility Electric and Utility Gas industry groups.

The broad Energy sector includes the Energy Other, Oil & Coal, and Oil Service industry groups.

Weak broad sectors over the past six months include Communications Services, Consumer Discretionary, and Technology.

If you look at the diagram below, the colored-in circles show all 11 of the broad sectors. The industry groups associated with each broad sector branch off into the rectangular shapes.

(Click any image to enlarge)

As you can see, the broad Consumer Discretionary sector holds more industry groups than any other broad sector. You can also see that there are some broad sectors that share industry groups.

Feel free to take some time to get to know the broad sectors and their respective industry groups. It’s worth it. 

I highlight this diagram because as a trader, you have to know where to start looking for strong trade ideas. There are lots of stocks to choose from. By categorizing them, it helps you narrow down what to analyze first.

I use relative strength analysis to know which broad sector I want to start to analyze, and then narrow down my search by industry groups, and then by individual securities associated with these groups like stocks and exchange traded funds.

Here, take a look at the six-month performance of all five of the broad sectors I mentioned above.

You can clearly see on this chart that the Utilities (red line) and Energy (blue line) broad sectors have far outperformed the other three. And, again, the Consumer Discretionary (green line), Communication Services (pink line), and Technology (light blue line) broad sectors are the worst-performing of the 11 broad sectors over the last six months.

What this tells you is that in terms of relative strength, Utilities and Energy are outperforming the other three broad sectors, and by a wide margin.

On Sector Prophets Pro, our data analytics platform, the Utility Gas and Utility Electric industry groups show demand in control and are in possession of positive relative strength.

Those industry groups are ranked #1 and #2 respectively in our Sector Relative Strength Matrix. So, these two industry groups are outperforming all of the other industry groups on a longer-term relative basis.

Take a look below.

These two industry groups are also outperforming the stock market. 

Both industry groups’ Sector Relative Strength charts are in rising columns of X’s and on Buy signals. So, these industry groups are outperforming the equally-weighted US benchmark S&P 500 on both a shorter-term and longer-term relative basis.

These two industry groups are in the hands of Demand. Only seven industry groups show their sector bullish percent charts (BPI) in X’s. And these two industry groups show the highest percentage of stocks on Buy signals within their sector universe.  

✅Utility Gas +62% on Buy signals 

✅Utility Electric +74% on Buy signals

Above, you can see the US Industry Bell Curve. This sector breadth indicator is another feature of Sector Prophets Pro. You can see the orange arrows point at the Utility Gas and Utility Electric industry groups shaded in blue.

The scale beneath the breadth indicator shows you the percentage of stocks within the industry groups that are trading on point-and-figure Buy signals on their respective trend chart.

The combination of relative strength—which tells you WHAT to buy—and breadth—which tells us WHEN to buy—sets you up for a good buying opportunity in the Utilities broad sector.

September is a volatile month, and stocks are falling from their August highs. So, institutions are putting capital to work (buying and accumulating stocks) in Utilities. It’s a defensive group known for safety, predictable earnings, and high dividend income during challenging times.

This has led me to recommend two high quality stocks from these industry groups to readers of Monthly Trend Trader, my premium research stock picking service.  

One recommendation is from the Utility Gas industry group

And the other is from the Utility Electric industry group.

Monthly Trend Trader is suitable for all investors, from the newbie just getting started to the very experienced advanced trader. We use momentum (relative strength investing) to get in alongside the big institutions at the beginning of each month, and we then ride bullish momentum through to the end of the month.

By investing in strong securities that reside in the strongest sectors, we increase our odds of generating superior returns and of growing wealth at a faster pace.  

The Sector Prophets Pro platform allows us to see exactly what’s going on in the stock market.  And I use it to personally handpick many of my winning recommendations.

Like in August, when we trounced the US stock market benchmark and generated some serious alpha.

The S&P 500 generated a negative -4% return in August.

But my Monthly Trend Trader readers generated a combined positive +37% return in August, outpacing the US stock market benchmark by +41% (4,100 basis points).

And we're at it again in September and this time we’re in the Utilities sector.

To find out more about Sector Prophets Pro, schedule a time to speak with customer service by clicking here.

To find out more about Monthly Trend Trader, schedule a time to speak with customer service by clicking here.

Got Sector Prophets Pro? Got Monthly Trend Trader?  You Should!

Costas Bocelli

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