Sometimes, trading is a wild ride. Sometimes it’s boring. Right now, I’m looking for boring trades, because some of the most boring trades are also the most profitable ones. I’ll show you what I mean below but I wanted to give you a heads up about a webinar I’m hosting later today that is critical for traders navigating the election.
Click here to sign up and see how to prepare your options account for the upcoming election. There is a lot a play and this will help you both protect your account and exploit the market patterns as November approaches.
The market is giving a lot of noise, and only a handful of clear signals. So, right now, with so much uncertainty, I want to make sure that I’m focused on the things that are providing certainty.
So, rather than trying to call the bottom in tech or semi-conductors or oil, and rather than chasing new lows when the market is showing mixed signals about accelerating lower or recovering, where should I be focused? For me, that’s the ultimate question – how do I stay comfortable in a naturally uncomfortable market?
Let’s look at some ideas to see where I might be able to find comfort, and the first stop will be in financials, with the ETF XLF:
Financials don’t look too bad, as long as this most recent turn isn’t the start of a more major liquidation. If not, then a continuation of that bullish run for the last month looks like a pretty safe sector to buy into. But perhaps I can do better. Perhaps I should be looking at consumer staples (think companies like Proctor & Gamble, Costco, Walmart, Coca-Cola, and Phillip-Morris) with the ETF XLP:
That looks fairly safe given the consistent trend even with the tumultuous picture in the broad market and tech stocks. But I think I can do one better, and that’s with a sector that has hardly flinched in the last 2 months, and that’s utilities, with ETF XLU:
I even added the trend channel lines in there so we can see easily the consistency of money-flow into the sector. The added benefit of this type of setup is that it adds a natural trailing stop to the position – if the ETF goes below the lower trend line, it indicates that the money isn’t buying into utilities anymore and I need to find a new sector to invest in.
Don’t get me wrong, this trade is very boring. And that’s a good thing. I love boring, profitable trades. I can add leverage with options to a boring, profitable trade. I can define my risk with a boring, profitable trade. And I can happily watch my trading account grow if I can consistently find boring, profitable trades.
If you’d like to get a list of ideas and setups just like this that could be of interest for trading opportunities, check out my Outlier Watch List.
And as always, please go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades. And if you have any questions, never hesitate to reach out.
Keith Harwood
Keith@optionhotline.com
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