The Dinner-Out Trade

Regular scanning of a handful of top sector ETFs can help you find breakouts just as they are starting. For example, on Thursday (7/3/14) the financial ETFs produced a breakout  above recent resistance as they set new 5-year highs:

The Financial Select Sector SPDR ETF, XLF, looks nearly identical to IYF. Both charts look the same because the top 5 holdings in each ETF are the same, so it doesn't usually matter which Financial ETF you follow.

Once you spot a breakout like this, look up the top holdings in the ETF (finance.yahoo.com  is good for this). Check out the charts of each of the top holdings to identify which stocks are responsible for the ETF chart's characteristics. If you find 2 or 3 of the top holdings showing strength and making high volume moves, you may have spotted a change in character in the market, or at least a certain sector.

The breakouts in IYF and XLF were primarily due to the strength in Berkshire Hathaway and Bank of America:

These would be two good candidates to investigate for possible bullishly-oriented stock or option trades. But earnings will be coming out soon from most of the companies in the Financial sector, and in most cases it would be prudent to wait until after earnings are announced for any of the Financial stocks. However, in today's Seasonal Forecaster newsletter I cover a low-risk play on an upcoming earnings release on one of the top holdings of IYF. I call it the ‘dinner-out' trade because we'll do a small trade and aim for enough profit for a nice dinner out. Once earnings come out on some of our favorite stocks with good seasonal track records, we'll get back to normal profits. The dinner-out trade will keeps us entertained, and hopefully well-fed, until then.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2014 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

The content on any of Market Tamer websites, products, or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options, and other securities involve risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities are not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/publications/risks/riskstoc.pdf). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

 

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