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Profe$$or

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Profe$$or

Re: None

Sunday, 11/25/2007 10:49:35 PM

Sunday, November 25, 2007 10:49:35 PM

Post# of 137481
As a trader, I've noticed that I've become less interested in how the NASDAQ and Dow are doing (though I'm interested in how they can affect my trades). Instead it is good to focus on the hot sector at the time. Even when the market as a whole isn't moving much, a discrete sector can be completely gonzo. When sectors really heat up, their cycles last for periods of one month to two years.

Hot sectors participate in marketwide rallies. Cold sectors don't. Even during major rallies, stocks in cold sectors trade in a range or even decline. That's why it is important to keep track of sectors.

Even when a sector is in the hot phase of its cycle, it can cool off for brief periods during the run.

After a sector reaches its peak, its fall can occur much more quickly than its journey up. Sometime the trip back down takes only half of the time the stock needed to go up.

What makes a sector hot? During bull runs, its the same thing that drives speculative stock - "tulips" - up and up. That thing is potential. Sectors that are perceived by the market to have potential can stay hot for as long as that sense of possibility remains untouched by some unfortunate reality.

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